Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd. 2023 Annual Report April, 2024 1 Section 1 Important Notice, Table of Contents, and Definitions The directors and the Board of Directors, the supervisors and the Supervisory Board, and Senior staff members of Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd. (hereinafter referred to as the Company) hereby confirm that there are not any important omissions, fictitious statements or serious misleading carried in this report, and shall take all responsibilities, individual and/or joint, for the reality, accuracy and completeness of the whole contents. Chairman of the Board of Directors of the Company Mr. Ji Zhijian, Financial Majordomo Mrs. Wang Jinxiu and the head of Accounting Department Mr. Li Sheng hereby confirm that the financial report of the annual report is true and complete. All the directors have attended this Board meeting of the Company. There is no significant risk having adverse influence on attainment of the Company's future development strategy and business targets. The paragraph " The prospect of the Company's future development " in Section 3 of this Annual Report describes major risks the Company may be confronted with, including the risk of Increasing market competition risk, the market promotion for new product and new technology slow, and the Accounts receivable is on the high side. See the related sections for the countermeasures to be taken by the Company. The profit distribution proposal reviewed and adopted at this Board meeting of the Company is: Based on the total capital stock of 843,212,507 shares, the dividend of RMB 0.3 in cash (including tax) will be distributed for every 10 shares; The Company will not transfer the capital reserve to increase capital stock. This report is written respectively in Chinese and in English. In the event of any discrepancy between the two above-mentioned versions, the Chinese version shall prevail. 2 CONTENTS Section 1 Important Notice, Table of Contents, and Definitions……………………………………………………………...................................................…………...2 Section 2 About the Company and Main Financial Indicators .................................................................................. 6 Section 3 Management discussion and analysis ........................................................................................................ 9 Section 4 Corporate governance .............................................................................................................................. 20 Section 5 Environmental and social responsibility .................................................................................................. 29 Section6Importantitems……………………………………………………………………………………….……30 Section 7 Change in Share Capital and Shareholders' Information…………………………………… ...……... ...34 Section 8 Information on Preferred Stock ............................................................................................................... 37 Section 9 Information on Corporate bonds .............................................................................................................. 38 Section 10 Financial Report..................................................................................................................................... 39 3 Reference Documents The accounting statements bearing the signatures and seals of the legal representative, the financial majordomo and the accountants in charge. 2. The original copies of all the Company's documents and the original copies of the bulletins published on the newspapers designated by the China Securities Regulatory Commission in the report period. 3. Time for reference: from Monday to Friday 8:00 - 11:30 (am) 1:00 - 4:30 (pm) Liaison persons: Mr. Song Wenbao, Ms Du Yu Tel: 0086-411-87968130 Fax: 0086-411-87968125 4 Definitions Defined item Stands for Meaning Reporting period Stands for From Jan. 1, 2023 to Dec. 31 2023 The Company, this Company Stands for Bingshan Refrigeration & Heat Transfer Technologies Co.,Ltd. Dalian Bingshan Group Engineering Co., Ltd.,one of the subsidiaries of the Company where Bingshan Engineering Company Stands for the Company holds 100% of its shares. Sonyo Compressor (Dalian) Co., Ltd. Formerly Panasonic Appliances Compressor (Dalian) Sonyo Compressor Stands for Co., Ltd. one of the subsidiaries of the Company, where the Company holds100% of its shares. Sonyo Refrigeration (Dalian) Co., Ltd. Formerly Panasonic Appliances Air-conditioning Sonyo Refrigeration Stands for and Refrigeration (Dalian) Co., Ltd., one of the subsidiary of the Company, where the Company holds 100% of its shares indirectly. Wuhan New World Refrigeration Industry Co., Ltd., one of the subsidiaries of the Company Wuxin Refrigeration Stands for where the Company holds 100% of its shares. Dalian Bingshan Guardian Automation Co., Ltd. one of the subsidiaries of the Company Bingshan Guardian Stands for where the Company holds 100% of its shares. 5 Section 2 About the Company and Main Financial Indicators Company information Short form of the stock Bingshan; Bingshan B Stock code 000530; 200530 Listed stock exchange Shenzhen Stock Exchange Legal name in Chinese 冰山冷热科技股份有限公司 Legal name abbreviation in Chinese 冰山冷热 Legal English name Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd. Legal English name abbreviation Bingshan Legal representative Ji Zhijian Registered address No.106, Liaohe East Road, Dalian Economic and Technological Development Zone Post code of Registered address 116630 Due to the overall relocation, the registered address of the Company was changed Historical changes of the Company's from 888 Southwest Road, Shahekou District, Dalian to 106 Liaohe East Road, registered address Dalian Economic and Technological Development Zone in March 2017. Office address No.106, Liaohe East Road, Dalian Economic and Technological Development Zone Post code of Office address 116630 Internet web site of the Company www.bingshan.cn E-mail of the Company 000530@bingshan.com II. Contact persons and information Secretary of the Board of Directors Authorized representative for securities affairs Name Song Wenbao Du Yu Bingshan Securities﹠Legal Affairs No.106, Liaohe Bingshan Securities﹠Legal AffairsNo.106, Liaohe Address East Road, Dalian Economic and Technological East Road, Dalian Economic and Technological Development Zone Development Zone Tel. 0411-87968130 0411-87968822 Fax 0411-87968125 0411-87968125 E-mail 000530@bingshan.com 000530@bingshan.com III. Information disclosure and place of preparation for inquiry Stock exchange website where companies disclose annual Shenzhen Stock Exchange reports Name of the newspaper designated the address of the China Securities Daily, Securities Times and website for publishing this Annual Report http://www.cninfo.com.cn Place where this Annual Report was prepared for inquiry Securities﹠Legal Affairs Department of the Company IV. Alteration to the registration Organization code 912102002423613009 Change in main business since the Company was listed No change Changes in the holding shareholder No change 6 V. Other related information Accounting firm engaged by the Company Name of accounting firm ShineWing CPAs (Special General Partnership) Office location of accounting firm 9/F,A Building No.,8 north street of Chao Yang Men, Dong Cheng District Beijing, China Name of signing certified public accountant Sui Guojun, Zhang Shizhuo Sponsor the Company appointed for performance of the consistent supervision duty in the reporting period □ Applicable √ Not applicable Financial consultant the Company appointed for performance of the consistent supervision duty in the reporting period Applicable □ Not applicable Office location of accounting Name of sponsor of financial Continuous supervision Name of Financial consultant firm advisor period Guotai Junan Building, 768 Guotai Junan Securities Co., From November 11, 2022 to Nanjing West Road, Jing 'an Dong Shuai、Li Xiang LTD December 31, 2023 District, Shanghai VI. Main accounting data and financial indicators Did the Company retroactively adjust or restate the accounting data of previous years due to change in the accounting policy and correction of accounting mistakes? √Applicable □ Not applicable Increase/decrease compared with 2023 2022 2021 previous year Operating revenue 4,815,941,467.70 2,893,085,310.29 66.46% 2,089,208,256.22 Net profit attributable to shareholders of listed 49,375,900.83 18,731,969.48 163.59% -269,606,893.80 companies Net profit belonging to the shareholders of listed companies after the deduction of 16,483,449.17 -272,983,508.15 106.04% -355,596,997.40 non-recurring profit and loss Net cash flow from operating activities -24,440,667.74 -56,247,299.36 56.55% 1,518,218.37 Basic earnings per share 0.06 0.02 200.00% -0.32 Diluted earnings per share 0.06 0.02 200.00% -0.32 Weighted average return on net asset yield 1.63% 0.61% Inecrease 1.02 percentage points -8.31% Increase/decrease compared with 2023.12.31 2022.12.31 2021.12.31 previous year Total assets 8,162,848,294.25 7,601,935,329.60 7.38% 5,735,570,604.67 Owner's equity attributable to shareholders of 3,047,513,577.75 3,006,120,427.03 1.38% 3,002,295,794.00 listed companies The lower of the Company’s net profit before and after deduction of non-recurring gains and losses in the most recent three fiscal years are all negative, and the audit report in the last year shows that the Company's ability to continue operations is uncertain □ Applicable √ Not applicable 7 The lower of the net profit before and after non-recurring gains and losses is negative □ Applicable √ Not applicable VII.1.Difference of accounting data between as per Chinese accounting standards and as per International Accounting Standards □ Applicable √ Not applicable 2. Difference of accounting data between as per Chinese accounting standards and as per Foreign Accounting Standards The difference of accounting data between as per Chinese Accounting Standards and as per International Accounting Standards was 0. 3.Explanation of reasons for differences in accounting data under domestic and foreign accounting standards √Applicable □Not applicable The difference of accounting data between as per Chinese Accounting Standards and as per International Accounting Standards was 0. VIII. The quarter main financial indicators the first quarter the second quarter the third quarter the fourth quarter Operating revenue 1,072,560,425.76 1,254,976,287.29 1,274,571,520.64 1,213,833,234.01 Net profit attributable to shareholders of listed companies 25,392,393.54 32,022,005.68 14,469,128.62 -22,507,627.01 Net profit belonging to the shareholders of listed companies after the deduction of non-recurring profit and 13,312,360.06 32,145,810.46 1,479,838.85 -30,454,560.20 loss Net cash flow from operating activities -158,425,157.75 31,630,960.77 -39,477,287.33 141,830,816.57 IX. Non-recurring profits and losses and their amounts item 2023 2022 2021 Disposal gains and losses of non-current asset -6,656,241.40 109,194,830.34 27,724,344.91 Government subsidies included in current profit or loss 8,263,130.89 11,878,746.43 15,993,001.31 Debt restructuring gains and losses 1,791,602.29 230,467.42 819,297.68 Profit or loss arising from contingencies unrelated to the 10,206,786.86 -2,019,000.00 normal operation of the company Disposal gains from investments on financial assets available for sale, and gains from fair value change of 14,073,910.32 -3,694,509.36 55,245,024.14 financial assets available for sale Reversal of impairment provisions for accounts receivable 3,784,207.57 subject to separate impairment testing The one-time expenses incurred by the enterprise due to the 3,928,060.93 discontinuation of related business activities Other non-operating revenue or expense 2,831,968.96 8,754,118.59 -5,129,941.48 Other profit and loss items that meet the definition of non 170,729,805.79 recurring profit and loss Influence on income tax 5,162,725.13 2,961,966.70 8,490,868.44 Influence on minority shareholders 168,249.63 397,014.88 170,754.52 Total 32,892,451.66 291,715,477.63 85,990,103.60 8 Section 3 Management discussion and analysis The industry situation of the Company during the reporting period 1. Industry development trend In recent years, the refrigeration and air conditioning industry has played an increasingly prominent role in national strategies such as food safety, energy security, consumption upgrading, energy conservation and carbon reduction. The high-end, digital, green, and service-oriented development of the industry has been rapid. In 2023, the refrigeration and air conditioning industry is still facing a complex domestic and international market situation, with intensified market competition, difficulties in improving efficiency, and high accounts receivable, which continue to plague the operation and development of the industry. In 2024, industry development will continue to differentiate and competition will continue to intensify. The transformation and upgrading of major enterprises in the industry will accelerate, and the pace of high-quality development will become more stable. 2. Challenges and opportunities faced by the Company (1)Opportunities faced by the Company Energy conservation, carbon reduction and improving energy efficiency have become the consensus of the whole society; Overall promotion of the national "double carbon" strategy; The 14th five year plan for the development of cold chain logistics has been issued, and the market demand for cold chain equipment is expected to grow rapidly; With the promulgation of the new cold storage design standard, the use opportunities of ammonia refrigerant have increased. With the strong technology bases, innovative business model, and system advantages, the Company is capable of capturing the above opportunities in a good position. (2)Challenges faced by the Company The cultivation of energy conservation and emission reduction market still needs time; the transformation and upgrading process is complex. II. The Company’s Main business during the reporting period Focusing on the hot and cold industry, the Company is committed to the development of industrial refrigeration and heating business, commercial refrigeration business, air conditioning and environment business, engineering and service business and new business fields, covering the key areas of the hot and cold industry chain and creating a complete hot and cold industry chain. The Company's main products include piston and screw refrigeration compressors/units, as well as pressure vessels, combination warehouses, controlled atmosphere preservation warehouses, refrigeration stations, etc. The Company provides product sales and comprehensive solutions for both domestic and international markets, with self operated sales as the main focus and channel sales as the auxiliary. In 2023, rigid demands such as food safety, energy security, consumption upgrading, energy conservation and carbon reduction will benefit the refrigeration and air conditioning industry; At the same time, the refrigeration and air conditioning industry is also facing issues such as intensified market competition and difficulties in improving efficiency. Faced with opportunities and challenges, the Company focuses on the hot and cold industries, continuously delving into advantageous segmented markets such as cold chain logistics, petrochemicals, beer and dairy products, meat slaughter, ship refrigeration, ice and snow venues, polycrystalline silicon, and vigorously expanding new businesses such as CCUS, ORC, energy storage thermal management, actively expanding and seizing the domestic market. 1. Industrial refrigeration and heating business 9 Industrial refrigeration is an important field reflecting the core technology of the Company. After years of development, the Company has been close to the technical level of the main international competitors in the field of industrial refrigeration, and has achieved catching up in some fields. Based on the traditional refrigeration, the Company realizes the balance of cold and heat through the utilization of heat, which greatly improves the energy utilization rate. During the reporting period, the Company signed multiple projects with industry giants such as BASF, Covestro, PetroChina, and Sinopec, and the influence of Bingshan brand in the industry continued to increase. 2. Commercial refrigeration business Commercial refrigeration is the Company's core business. In China, the Company takes the lead in opening up the green intelligent cold chain from the first kilometer of the field to the last 100 meters of the residential community, which is the competitive advantage of the Company. Focusing on food refrigeration, the Company has patented products pre-cooling from the field, all kinds of quick freezing equipment and refrigeration facilities of various specifications, and China's leading experience in the design and installation of large-scale ammonia and carbon dioxide refrigerators. On the basis of absorbing the relevant experience of Japan, Europe and the United States, combined with China's new needs, to provide newer products, better solutions and fresher experience for the field of food freezing and refrigeration. During the reporting period, the Company successfully signed multiple key projects, including the expansion project of the Red Star Cold Chain Direct Supply Center, the Fengchu Langfang Central Kitchen project, the Shanxi Wuzhai Quick Frozen Corn project, and the supply and marketing cold chain logistics project. 3. Air conditioning and environment business In recent years, relying on the complete industrial chain, the Company has continuously carried out transformation and upgrading in the field of air conditioning and environment, developed more energy-saving and environmental protection products around the blue sky project, and accelerated the transformation and upgrading from air treatment to environmental governance. At present, the Company has developed a series of innovative products around the market segments of commercial air conditioning, central air conditioning and special air conditioning, and provides corresponding solutions in different segments around these innovative products. For hospitals, electronic factories, high-end real estate, rail transit and other fields, provide targeted solutions. During the reporting period, the Company increased its investment in its subsidiary, Bingshan Air Conditioning, by 30 million yuan to support the development of the air source heat pump industry. 4. Engineering and service business Cold and hot engineering and service are the Company's advantageous business fields. In recent years, the Company has realized transformation and upgrading from the manufacturer of cold and hot equipment to the service provider of comprehensive solution of cold and hot through the development of engineering and service industry, and realized the dual wheel drive of the enterprise, and provided more professional and accurate services to each segment market, and constantly created new value for customers and realized common growth. At present, the Company focuses on petrochemical technology, refrigeration, central air conditioning, ice and snow engineering, artificial environment and other market segments. Relying on the enterprise's industrial chain, value chain and ecosystem, the Company provides services from consulting, planning, design to manufacturing, installation, commissioning and service in the whole process and life cycle. At the same time, according to the needs of customers, promote the combination of industry and finance, and provide services 10 for customers through the form of project general contracting and financial leasing. During the reporting period, the Company increased its investment in its subsidiary Bingshan Engineering by 100 million yuan and strengthened the construction of large-scale engineering platforms. 5. New business With the deepening of China's economic transformation and upgrading, as well as the continuous introduction of environmental governance policies, the domestic industrial energy conservation and environmental protection industry is growing rapidly, the level of energy conservation and consumption reduction of enterprises and the comprehensive utilization of resources is constantly improving, and the energy industrial structure has changed. Strengthening the optimal utilization of energy has become a development trend. For low-grade energy recycling, the Company provides customers with a series of energy-saving, environmental protection, efficient new products, in line with the national strategic requirements of energy conservation, carbon reduction and sustainable development, and contributes professional wisdom to the national carbon peak and carbon neutral strategy. During the reporting period, the Company made good progress in new businesses such as CCUS, ORC, and energy storage thermal management. III. Analysis of core competence The Company focuses on main business of refrigeration and heating; independent R&D and joint venture partnerships are cooperate with each other effectively; capital resources integration and business model innovation are in a positive interaction; the community of business and interest are being multi-storey created; the develop mode with Bingshan characteristic are formed. The Company has the integrated refrigeration and heating industrial chain for offering kinds of comprehensive solution services, including design, manufacture, installation and maintenance etc., and can satisfy individual requirements preferably. The Company possesses a mature and solid marketing networks and after-sale service network on/off-line, and can offer high quality and high value-added services more initiative and faster for clients from around the city. Following the technical route of cold and heat balance, the Company has independently developed a series of energy-saving, environment-friendly, efficient and intelligent cold and heat technologies and products, and actively fulfilled the dual carbon responsibility. While promoting the transformation and upgrading of its inherent business in an orderly manner, the Company actively cultivates new momentum for development, and the path of sustainable growth is increasingly clear. During the reporting period, the Company focused on the hot and cold business, deeply cultivated the market segment, and steadily improved its sales force, product force, technical force, engineering force and service force, so as to further enhance its core competitiveness. IV. Analysis of main business 1. summarize In 2023, the Company focuses on the hot and cold business, deeply cultivates segmented markets, solidly enhances core competitiveness, effectively expands industry influence, and continuously strengthens its main business. In 2023, the Company achieved an operating revenue of 4,815.94 million yuan, an increase of 66.46% year-on-year; The net profit attributable to the shareholders of the listed company was 49.38 million yuan, , an increase of 163.59% year-on-year. 11 During the reporting period, the Company adhered to principles of innovation and accelerated development. We have independently developed multiple outstanding products, including CO2 transcritical products, heat pump products, and energy storage thermal management products. The Company's CO2 boosting liquefaction device was selected as an innovative product at the 2023 China Refrigeration Exhibition. The Company's falling film semi enclosed screw ice water unit has been selected for the 2022 China Refrigeration Society Energy Conservation and Ecological Environment Product and Technology Catalog. The key technology research and industrialization of the Company's CO2 subcritical and transcritical cold and heat coupling system has won the first prize of Dalian Science and Technology Progress Award. The Company has been listed as a "Green Factory" in the 2023 Green Manufacturing List of the Ministry of Industry and Information Technology. During the reporting period, the subsidiary of the Company, Bingshan Engineering Company, and Sonyo Refrigerator, collaborated efficiently and continued to deepen their market segmentation. In the field of product business, actively serving high-end customers, and signing multiple projects with industry giants such as BASF, Covestro, PetroChina, and Sinopec; Continue to lead the polysilicon market and vigorously expand the lithium chemical market. In the field of engineering, multiple key projects including the expansion project of Red Star Cold Chain Direct Supply Center, Fengchu Langfang Central Kitchen Project, Shanxi Wuzhai Quick Frozen Corn Project, and Supply and Marketing Cold Chain Logistics Project have successfully won the bid. In the field of energy industry, CCUS projects and energy storage thermal management projects have been rapidly promoted. During the reporting period, the Company's subsidiary, Sonyo Compressor, achieved independent innovation and qualitative growth. R290 DC variable frequency vortex compressor for heat pump hot water has been selected as an innovative product at the 2023 China Refrigeration Exhibition. The high-power vortex compressor used in air source heat pump units has been selected as the "Guiding Catalogue for the Promotion and Application of Liaoning Province's First (Set) Major Technical Equipment". Awarded as a national level intelligent manufacturing excellent scene, provincial-level intelligent factory, provincial-level green factory, and provincial-level quality benchmark. Awarded the title of "Excellent Supplier" by Songz and Tongfei, with orderly expansion of energy storage facilities. During the reporting period, the Company's newly added subsidiary, Sonyo Refrigeration, implemented business adjustments to pursue synergies. Peel off the multi unit air conditioning business and focus on the industrial energy-saving market, resulting in a significant year-on-year increase in orders. The marine lithium bromide absorption refrigeration unit has been selected as the "Guiding Catalogue for the Promotion and Application of the First (Set) Major Technical Equipment in Liaoning Province". Independently developing Stirling flue gas generators to help reduce the cost of gas heat pump air conditioning products. During the reporting period, the Company's subsidiary, Wuhan New World Refrigeration continued to optimize its products and solutions. Professional support for energy security, with a significant increase in sales of underground cooling devices in mines. Optimize the development of oil-free screw compressors and actively expand the gas compression market. The water vapor screw compressor unit was selected as an innovative product at the 2023 China Refrigeration Exhibition and the 2022 China Refrigeration Society Energy Conservation and Ecological Environment Product and Technology Catalog. 12 During the reporting period, the subsidiary of the Company, Bingshan Guardian, focused on energy-saving control and innovative development of cold and hot systems. Develop a battery management system for all vanadium flow battery control systems, and collaborate deeply with key customers such as Rongke Power and Kaifeng Times Power. Building a 5G fully connected factory and rapidly advancing digital transformation. Selected as a pilot demonstration enterprise for the integrated application of "5G+Industrial Internet". 2. Sales income and costs (1) Sales income structure 2023 2022 Year-on-year Proportion to the Proportion to the Amount Amount increase/decrease Sales costs Sales costs Total sales income 4,815,941,467.70 100% 2,893,085,310.29 100% 66.46% By industry Refrigeration and air-conditioning 4,708,789,817.06 97.78% 2,803,347,359.37 96.90% 67.97% equipment Others 107,151,650.64 2.22% 89,737,950.92 3.10% 19.41% By product Industrial product 3,357,438,836.06 69.72% 1,920,458,161.82 66.38% 74.82% Installation works 1,294,663,341.77 26.88% 857,764,430.03 29.65% 50.93% Others 163,839,289.87 3.40% 114,862,718.44 3.97% 42.64% Domestic sales 4,278,214,645.22 88.83% 2,713,167,600.04 93.78% 57.68% Foreign sales 537,726,822.48 11.17% 179,917,710.25 6.22% 198.87% (2) Main business structure Increase/decrease of Increase/decrease operating revenues of operating costs Increase/decrease of gross profit on Operating revenue Operating costs Gross profit on a year-on-year on a year-on-year a year-on-year basis basis basis By industry Refrigeration and 4,708,789,817.06 3,931,870,621.80 16.50% 67.97% 59.84% Increase 4.25 percentage points air-conditioning By product Industrial product 3,357,438,836.06 2,690,266,141.68 19.87% 74.82% 67.86% Increase 3.32 percentage points Installation works 1,294,663,341.77 1,195,610,122.48 7.65% 50.93% 43.40% Increase 4.85 percentage points Others 56,687,639.23 45,994,357.64 18.86% 125.62% 95.98% Increase 12.27 percentage points By region Domestic sales 4,171,062,994.58 3,535,346,049.38 15.24% 58.99% 53.36% Increase 3.11 percentage points Foreign sales 537,726,822.48 396,524,572.42 26.26% 198.87% 156.41% Increase 12.21 percentage points By sales model Total 4,708,789,817.06 3,931,870,621.80 16.50% 67.97% 59.84% Increase 4.25 percentage points (3)Was the Company's sales income on material objects more than that on labor service? √ Yes □ No Year-on-year Industry category Item 2023 2022 increase/decrease Sales volume 836,513 125,863 564.62% Main refrigeration unit for Production output 873,086 125,675 594.72% industrial or commercial use Inventory level 108,409 75,587 43.42% 13 Reason for change in the related data by 30% or higher on a year-on-year basis √Applicable □ Not applicable The Company completed the acquisition of Sonyo Compressors and Sonyo Refrigeration System in November 2022, and completed the acquisition of Sonyo Refrigeration in June 2023. During the reporting period, three subsidiaries of Panasonic were included in the statistical scope, and there were significant year-on-year changes in relevant data. (4)Performance of major sales contracts and major procurement contracts signed by the company up to the reporting period Applicable √ Not applicable (5)Sales cost structure 2023 2022 Proportion to the Year-on-year Industry category Item Proportion to the Amount Amount increase/decrease operating costs operating costs Direct materials 3,289,266,971.15 82.12% 2,205,570,125.13 86.92% 49.13% Labor wages 484,370,022.22 12.09% 208,996,790.95 8.24% 131.76% Refrigeration and Depreciation 75,764,314.69 1.89% 33,450,400.07 1.32% 126.50% air-conditioning Utilities 31,810,562.98 0.79% 19,274,676.78 0.76% 65.04% Others 124,385,587.16 3.11% 70,236,848.47 2.77% 77.09% Total operating costs 4,005,597,458.19 100.00% 2,537,528,841.40 100.00% 57.85% (6) Was the Company's consolidated range change during the reporting period? Applicable Not applicable The entity included in the consolidated financial statements this year has increased by one compared to the previous year. During the reporting period, the Company acquired 40% equity of Panasonic Refrigeration (Dalian) Co., Ltd. ("Panasonic Refrigeration") held by Panasonic Electric (China) Co., Ltd; Acquired 60% equity of Panasonic Refrigeration held by Sanyo Electric Co., Ltd. After the completion of the equity transfer, the Company holds 100% equity of Panasonic Refrigeration and is included in the scope of consolidation. (7) Major change or adjustment in the Company's products or service in the reporting period □ Applicable √ Not applicable (8) Information on the Company's major customers and major suppliers Information on the Company's major customers Total sales volume from top five customers (yuan) 567,585,617.15 Proportion of the total sales volume from top five customers to the annual sales volume 11.79% Proportion of the related party total sales volume from top five customers to the annual sales volume 3.72% Proportion to the annual No. Name of customer Sales volume (yuan) sales volume 1 Customer 1 179,269,129.59 3.72% 2 Customer 2 109,987,746.81 2.28% 3 Customer 3 101,383,384.54 2.11% 4 Customer 4 92,244,220.11 1.92% 5 Customer 5 84,701,136.10 1.76% Total —— 567,585,617.15 11.79% Information on the Company's top five customers Among the top five customers mentioned above, Customer 1 is related to the Company. Information on the Company's major suppliers Total purchase volume from top five suppliers (yuan) 432,966,587.81 Proportion of the total purchase volume from top five suppliers to the annual purchases volume 11.09% Proportion of the related party total purchase volume from top five suppliers to the annual purchases volume 1.89% 14 Information on the Company's top five suppliers Purchase Proportion to the annual No. Name of supplier volume (yuan) purchase volume 1 Supplier 1 175,787,633.82 4.50% 2 Supplier 2 73,737,385.70 1.84% 3 Supplier 3 72,015,342.76 1.22% 4 Supplier 4 63,809,032.17 1.89% 5 Supplier 5 47,617,193.35 1.63% Total —— 432,966,587.81 11.09% Among the top five suppliers mentioned above, Supplier 4 had an associated relationship with the Company. 3. Expenses Increase/decrease of gross 2023 2022 Explain for major changes profit on a year-on-year basis Selling expenses 233,862,026.48 153,735,714.96 52.12% Due to changes in the scope of Administrative 245,326,181.11 186,378,204.50 31.63% consolidation, there have been expenses significant year-on-year changes in Financial expenses 30,158,077.47 11,825,523.03 155.03% relevant data. R&D expenses 164,185,717.71 76,792,805.69 113.80% 4. R&D expenditure Information on R&D expenditure Increase/decrease on a year-on-year 2023 2022 basis The quantity of the person engaged in R&D 560 504 11.11% The quantity proportion of the person engaged in R&D 12.95% 14.18% Decrease 1.23 percentage points The spending amount on R&D(yuan) 164,185,717.71 76,792,805.69 113.80% R&D spending accounts for the proportion of revenue 3.41% 2.65% Increase 0.76 percentage points The amount of R&D investment capitalization(yuan) 0.00 0.00 0.00% Capitalize R&D investment for the proportion of R&D 0.00% 0.00% 0.00% spending Reasons for the remarkable change in R&D spending accounts for the proportion of revenue compared with the previous year √ Applicable □Not applicable The Company completed the acquisition of Sonyo Compressors and Sonyo Refrigeration System in November 2022, and completed the acquisition of Sonyo Refrigeration in June 2023. Due to changes in the scope of consolidation, there have been significant year-on-year changes in relevant data. Reasons for the substantial changes in the capitalization rate of R&D investment and its rationality □ Applicable √ Not applicable 5. Cash flows Year-on-year Item 2023 2022 increase/decrease Sub-total of cash inflows from operating activities 4,269,130,191.69 2,419,852,020.16 76.42% Sub-total of cash outflows from operating activities 4,293,570,859.43 2,476,099,319.52 73.40% Net amount of cash flow generated in operating -24,440,667.74 -56,247,299.36 56.55% activities Sub-total of cash inflows from investing activities 46,010,527.14 419,938,843.20 -89.04% 15 Sub-total of cash outflows from investing activities 269,378,896.52 452,538,330.23 -40.47% Net amount of cash flow generated in investing -223,368,369.38 -32,599,487.03 -585.19% activities Sub-total of cash inflows from financing activities 451,319,569.70 871,841,047.27 -48.23% Sub-total of cash outflows from financing activities 454,362,447.06 301,774,629.30 50.56% Net amount of cash flow generated in financing -3,042,877.36 570,066,417.97 -100.53% activities Net increase in cash and cash equivalents -251,221,467.19 482,692,465.30 -152.05% Reason for change in the related data by 30% or higher on a year-on-year basis √ Applicable □ Not applicable 1. The net cash flow generated from operating activities has significantly increased year-on-year, mainly due to an increase in sales orders and an improvement in payment collection. 2. The net cash flow from investment activities decreased significantly year on year, mainly due to the impact of more cash received from investment income in the same period last year and the transfer of Sonyo Compressor into the subsidiary's fixed assets investment in the current period. 3. The net cash flow generated from financing activities decreased significantly year-on-year, mainly due to the acquisition of large bank merger and acquisition loans in the same period last year. Reason for remarkable difference between the cash flows from the Company's operating activities in the reporting period and the net annual profit. □Applicable √ Not applicable V. Analysis of the non-main business □ Applicable √ Not applicable VI. Analysis of assets & liabilities 1. Remarkable change in assets Monetary unit: RMB yuan 2023.12.31 2022.12.31 Explain for Proportion to Proportion to Proportion increase/decrease Amount Amount major changes the total assets the total assets Monetary funds 951,039,570.11 11.65% 1,006,165,899.18 13.24% Decrease 1.59 percentage points Accounts receivable 1,576,433,924.16 19.31% 1,409,978,442.95 18.55% Increase 0.76 percentage points Contract assets 237,076,878.71 2.90% 225,790,875.78 2.97% Decrease 0.07 percentage points Inventories 1,638,139,479.14 20.07% 1,395,344,780.24 18.36% Increase 1.71 percentage points Investment property 123,589,681.50 1.51% 115,332,918.20 1.52% Decrease 0.01 percentage points Long-term equity 521,274,947.50 6.39% 562,987,771.94 7.41% Decrease 1.02 percentage points investment Fixed assets 1,291,851,402.46 15.83% 1,229,029,368.93 16.17% Decrease 0.34 percentage points Construction in 114,801,351.21 1.41% 115,577,902.54 1.52% Decrease 0.11 percentage points progress Use right assets 30,548,057.08 0.37% 30,941,662.26 0.41% Decrease 0.04 percentage points Short-term loans 262,287,784.38 3.21% 274,052,990.15 3.61% Decrease 0.40 percentage points Contract liabilities 787,685,294.53 9.65% 647,645,820.57 8.52% Increase 1.13 percentage points Long-term loans 679,700,000.00 8.33% 715,100,000.00 9.41% Decrease 1.08 percentage points Lease liabilities 24,134,986.97 0.30% 11,230,532.05 0.15% Increase 0.15 percentage points 2. Assets & liabilities which are measured by fair value √ Applicable □ Not applicable Other non-current financial asset measured in fair value is 149,950,861.31 yuan at the year beginning,and 164,024,771.63 yuan at the year end. Restrictions on asset rights as of the end of the reporting period By the end of reporting period, the Company’s asset rights 351,238,387.77 yuan was limited, the reason for the limitation: the deposit and the bank account were frozen; bank pledge; mortgage. 16 VII. Analysis of investments 1.The overall situation √ Applicable □ Not applicable Investment in 2023(yuan) Investment in 2022(yuan) Amount of variation 521,274,947.50 562,987,771.94 -7.41% 2.The significant equity investment during the reporting period □Applicable √Not applicable 3 The significant non-equity investment during the reporting period □Applicable √Not applicable 4.The financial asset investment (1) The securities investment √ Applicable □ Not applicable Accumula Account Changes in the tive Initial ing Stock Stock Book value at the profit and loss of change of Current sale Report period Book value in the Accounting Source investment measure code abbreviation beginning the fair value in fair value amount profit and loss ending subjects of funds cost ment this period credited to model equity fair Other value Non-current Own 601211 Guotai Jun’an 10,910,008.00 148,267,008.72 14,073,910.32 0.00 0.00 19,856,214.56 162,340,919.04 measure financial funds ment assets total 10,910,008.00 -- 148,267,008.72 14,073,910.32 0.00 0.00 19,856,214.56 162,340,919.04 -- Until 31 December, 2023, the Company held 10,910,008 numbers of shares of Guotai Jun’an Securities Co., Ltd.. (2) Derivative investment □Applicable √ Not applicable During the reporting period, the Company does not exist derivative investment. 5. The use of funds raised □Applicable √ Not applicable VIII. The material assets and equity sale 1. The material assets sale □Applicable √Not applicable 2. The material equity sale □Applicable √Not applicable IX. Analysis of major subsidiary companies and mutual shareholding companies √ Applicable □ Not applicable Unit: ten thousand yuan (except for registered capital) 17 Operating registered Net profit Company name Type The main business total assets net assets income capital Vending machine development, manufacturing, mutual sales, installation, JPY 4,000 Fuji Bingshan shareholding 47,017 13,752 20,985 -8,568 maintenance and million company related consulting and after-sales service New building mutual Jingxue energy-saving RMB 108 shareholding 181,548 83,170 115,210 3,802 Insulation board, refrigerated million company storage door High-grade mutual building hardware, USD 18,064.5 Bingshan Metal shareholding 37,256 31,425 46,488 6,373 plumbing thousand company equipment Manufacture and RMB Sonyo sales of gas subsidiary 442.3967milli 176,400 116,224 133,019 11,743 Compressor compression on machinery Subsidiary companies obtained or disposed in the reporting period √Applicable □Not applicable The entity included in the consolidated financial statements this year has increased by one compared to the previous year. During the reporting period, the Company acquired 40% equity of Panasonic Refrigeration (Dalian) Co., Ltd. ("Panasonic Refrigeration") held by Panasonic Electric (China) Co., Ltd; Acquired 60% equity of Panasonic Refrigeration held by Sanyo Electric Co., Ltd. After the completion of the equity transfer, the Company holds 100% equity of Panasonic Refrigeration and is included in the scope of consolidation. X. The structured corporate bodies which the Company controlled □Applicable √Not applicable XI. Development prospect of the Company Major risks faced and countermeasures adopted by the Company (1)Increasing market competition risk Countermeasures: focus on the hot and cold industry, deeply cultivate the market segmentation; rapidly improve the engineering and manufacturing power; orderly improve the level of intelligent manufacturing and service-oriented manufacturing; speed up the transformation and upgrading of inherent undertakings; accelerate the implementation of new kinetic energy cultivation; continue to build Bingshan enterprise and interest community. (2)Risk of slow marketing of new products and technologies Countermeasures: create differentiated competitiveness of new products and technologies; strengthen the technology marketing and service marketing, and cultivate the market segmentation professionally; appropriate 18 use of financial leasing, contract energy management and other innovative models. (3)Risk of high level of trade receivables Countermeasures: strictly implement the project management system and further strengthen the management of accounts receivable; enhance quality of contract through intensified customer credit assessment and contract appraisal; effective control of increase in trade receivables by reduction of guarantee deposits, and taking bank credit instruments as guarantee deposits; improve contract execution through stricter review on goods delivery, intensified control on project construction and acceptance, and post-sale service; prepare special composition solutions and incentive policy to accelerate settlement of trade receivables with relatively long aging. In 2024, the Company will focus on cold and hot business, further develop cold chain logistics, petrochemical industry, ship refrigeration, ice and snow venues, CCUS, energy storage and heat management and other market segments, solidly improve core competitiveness, effectively expand industry influence, continue to strengthen main business, and strive to achieve rapid growth. In 2024, the main business strategies are as follows: (1) Sales force. Strengthen marketing planning and optimize incentive allocation. Consolidate traditional markets and strengthen the exploration of new fields. Increase the proportion of self products and increase the gross profit margin of the project. (2) Product force. Guided by customer needs, accelerate the development of innovative products. Continuously promote product standardization, serialization, and modularization. Integrate internal technical resources of the Company and strengthen collaborative design and development. (3) Technical force. Focusing on engineering technologies such as CO2 transcritical technology, environmental simulation technology, cold and hot balance technology, and ultra-low charging system technology, we will continue to optimize and improve them. (4) Engineering force. Strengthen construction management to ensure project progress. Strengthen acceptance management and promote orderly acceptance. Continuously carry out safety and quality improvement and compliance inspections. (5) Service force. Fully closed tracking and closed-loop management to improve customer satisfaction. Continuously optimize business processes, improve service quality and efficiency. The above-mentioned business plan does not represent the earnings forecast of the Company for the year of 2024. Whether it can be achieved depends on the changes of market conditions and the efforts of management teams and other factors. There are great uncertainties. Investors should pay special attention to it. XII. Record of investigation, communication, and other activities in the reporting period √Applicable □Not applicable For details, please see http://irm.cninfo.com.cn/ircs/company/companyDetail?stockcode=000530&orgId=gssz0000530 19 Section 4 Corporate governance I. Basic situation of corporate governance Within the reporting period, the Company centered around the operation subject as “Leading innovation, Creating value” with the theme " integrity, innovation and return of the king"”, relying on the opportunity of overall relocation and transformation of the Company, to further deepen and perfect the normative internal control system and upgrade the governing level of the Company continuously. There were no problems with the Company concerning horizontal competition caused by restructures and other reasons. The main normal associated transactions between the Company and the associated companies included purchasing the supporting products for package projects from the associated companies, and selling the supporting parts and components to the associated companies and providing them with the labor service. Associated transactions between the Company and the associated companies are necessary for normal production and operation and helpful for the Company’s healthy development, and therefore will continue. The Company will strictly follow the related decision-making procedures and fulfill the obligation in information disclosure in order to further regulate associated transactions. Was there any deviation of the Company's corporate governance from the requirements in the Company Law and China Securities Regulatory Commission's regulations? □ Yes √ No There was no deviation of the Company's corporate governance from the requirements in the Company Law and China Securities Regulatory Commission's regulations. II. Status of the Company's business, staff, asset, organization and finance separations from the holding shareholder The Company was separated from the holding shareholder in business, staff, asset, organization and finance, and has the independent and complete business and operation capability. III. Horizontal competitions □ Applicable √ Not applicable IV Shareholders’ general meeting convened in the reporting period 1. Annual Shareholders’ general meeting within this reporting period The proportion of Session number of meeting The type of the meeting participate date Disclosing date Disclosing index investors 2022 Annual Shareholders’ general http://www.cnin 29.44% May 25, 2023 May 26, 2023 Annual Shareholders’ General Meeting meeting fo.com.cn V. Information on the Company’s Directors, Supervisors, Senior Management and Staff 1. basic information Shares Increase on Decrease in Shares held Starting Ending held at holding of holding of Office-hol at the end of Name Position Sex Age date of date of beginning shares in this shares in this ding state period office term office term of period period period (shares) (shares) (shares) (share) Ji Zhijian Chairman Incumbent M 56 Mar.27, Jan.11, 1,528,830 0 0 1,528,830 20 2014 2025 Jan.12, Jan.11, Fan Wen Director Incumbent M 59 7,770 0 0 7,770 2022 2025 leave Jan.12, Apr.9, Yin Xide Vice Chairman M 52 90,080 0 0 90,080 office 2022 2024 Jan.12, Jan.11, Song Wenbao Director Incumbent M 50 593,880 0 0 593,880 2022 2025 leave Jan.12, Apr.9, Dono Shigeru Director M 62 0 0 0 0 office 2022 2024 Nishimoto Director Incumbent M Jun.5, Jan.11, 57 0 0 0 0 Shigeyuki 2019 2025 M May.14, Jan.11, Zhai Yunling Independent director Incumbent 60 0 0 0 0 2021 2025 May.14, Jan.11, Liu Yuanyuan Independent director Incumbent F 49 0 0 0 0 2021 2025 Incumbent F May.14, Jan.11, Yao Hong Independent director 50 0 0 0 0 2021 2025 Chairman of the board Jan.17, Jan.11, Hu Xitang Incumbent M 56 0 0 0 0 of Supervisors 2019 2025 Jan.21, Jan.11, Dai Yuling Supervisor Incumbent F 46 0 0 0 0 2016 2025 May.15, Jan.11, Li Sheng Supervisor Incumbent M 44 0 0 0 0 2020 2025 Jan.1, Jan.11, Cai Liyong General manager Incumbent M 50 0 0 0 0 2024 2025 Deputy general Jan.12, Jan.11, Lu Jun Incumbent M 58 2,500 0 0 2,500 manager 2022 2025 Deputy general Jan.12, Jan.11, Yang Fuhua Incumbent M 52 0 0 0 0 manager 2022 2025 Chief Financial May.14, Jan.11, Wang Jinxiu Incumbent F 53 5,000 0 0 5,000 Officer 2021 2025 Feb.5, Jan.11, Song Wenbao Board secretary Incumbent M 50 - - - - 2013 2025 leave Jan.1, Jan.1, Yin Xide General manager M 52 - - - - office 2021 2024 Total 2,228,060 0 0 2,228,060 During the reporting period, whether any directors or supervisors leave office or senior managers are dismissed √Applicable □Not applicable The Company held the 18th meeting of the 9th Board of Directors on November 23, 2023, and approved the report on the dismissal and appointment of the Company's General Manager. Dismiss Mr. Yin Xide from his position as General Manager of the Company according to the development needs of the Company; Upon nomination by the Chairman of the Company, Mr. Cai Liyong has been appointed as the General Manager of the Company. His official dismissal and appointment date is January 1, 2024, and his term of office expires on the expiration of the 21 9th Board of Directors of the Company. Changes of directors, supervisors, senior managers of the Company Name Position held Type Date Reason Yin Xide General Manager Dismissal Jan 1,2024 Company development needs Cai Liyong General Manager Appointment Jan 1,2024 Company development needs Yin Xide Vice Chairman Leave office Apr 9,2024 Resignation due to job changes Dono Shigeru Director Leave office Apr 9,2024 Resignation due to job changes Office holding Professional background, main work experiences and the main duties and responsibilities of incumbent directors, supervisors, senior managers of the Company main duties and Name Position held Professional background Main work experience responsibilities doctorate degree in Successively acting as GM, Chairman of Panasonic Cold-Chain.; Related management of the Ji Zhijian Chairman Chairman and President of Dalian Bingshan Group Co., Ltd.; responsibilities of Dalian University of Chairman of the Company. the Chairman Technology served as vice Minister of Import and Export Department and Related Minister of Import and Export Department of the Company; Assistant Fan Wen Director Graduate degree responsibilities of general Manager and Vice President of DalianBingshan Group Co., the Director LTD.; Director of Jiangsu JingXue Insulation Technology Co.,Ltd. Director and Related graduate from Zhejiang Successively acting as representative for securities affairs, board Song Wenbao Board responsibilities of University,CFA secretary of the Company. Secretary Board Secretary served as the director of Financial Planning Room and Finance Department System Overall Room of Panasonic Corporation Related Nishimoto graduated from Meiji Director Headquarter; the director of Regional Financial Integration Room, responsibilities of Shigeyuki university CFO of Panasonic Corporation China & Northeast Asia Company; the the Director supervisor of Dalian Bingshan Group Co., LTD. Professor of Law School of Dalian Maritime University, lawyer of Related Independent Doctor of Law, Beijing Jincheng Tongda (Dalian) Law Firm, legal adviser of Dalian responsibilities of Zhai Yunling director professor, lawyer Municipal People's Government, member/arbitrator of Dalian the Independent Arbitration Commission director Professor of Accounting School of Dongbei University of Finance and Economics, Director of Sino-German Management Control Related Independent Research Center, independent director of China Railway Tielong responsibilities of Liu Yuanyuan Doctor of Accounting director Container Logistics Co., LTD.,; independent director of Bank of the Independent Dalian Co., LTD.; independent director of Kincai (Liaoning) Life director Science and Technology Co., LTD. Yao Hong Independent graduate from China Doctor of Management, School of Economics and Management, Related 22 director University of Political Dalian University of Technology, Independent director of Shanghai responsibilities of Science and Law, Binku Network Technology Co., LTD., Independent director of Hualu the Independent professor of law Zhida Technology Co., LTD., Independent director of Harbin Hattou director Investment Co., LTD., Independent director of Fushun Special Steel Co., Ltd. Chairman of graduated from Nanjing Related Hu Xitang Board of University of Science served as the chairman of the labor union of the Company. responsibilities of Supervisors and Technology the Supervisor Related acting as the chief of the Financial Dept. of Dalian Bingshan Group Dai Yuling Supervisor Senior Accountant responsibilities of Company Ltd. the Supervisor graduated from Dalian acting as the Director of Operation Management Department of Related Li Sheng Supervisor University of Dalian Bingshan Group Company Ltd;chief of the Financial Dept. of responsibilities of Technology the Company. the Supervisor Heilongjiang University served as the General Manager of Dalian Bingshan Ryosetsu Quick of Commerce (now Freezing Equipment Co., Ltd., the General Manager of Wuhan New Related renamed Harbin Cai Liyong GM World Refrigeration Industry Co., Ltd., and the General Manager of responsibilities of University of Bingshan Sonyo Refrigeration (Dalian) Co., Ltd. Starting from January GM Commerce) majoring in 1, 2024, appointed as the General Manager of the Company. refrigeration and freezing served as designer and vice minister of the Company; general Manager graduated from Jilin of Dalian Bingshan Air-conditioning Equipment Co., Ltd; the Deputy Related University of Lu Jun DGM General Manager of Dalian Bingshan Group Engineering Co., LTD. ; responsibilities of Technology, Graduate the assistant to the general Manager and head of the Operation and DGM degree, Senior Engineer. Management Department of the Company. served as engineer, deputy director and director of complete set graduated from Xi 'an design Department of the Company; served as deputy General Related Yang Fuhua DGM Jiaotong University, Manager of Dalian Bingshan Group Engineering Co., LTD; served as responsibilities of Senior Engineer chief engineer of the Company's business Headquarters and deputy DGM Head of the Research and development Headquarters. served as cost accountant in finance Department of the Company and Minister of Finance Department of DalianBingshan Air Conditioning Related Wang Jinxiu CFO Senior accountant Equipment Co., LTD.; served as the Director of the Financial responsibilities of Management Department of the Company. served as Chief Financial CFO Officer since May 2021. Office holding in shareholder unit √ Applicable □ Not applicable If receiving remuneration or allowance from Name of office holder Shareholder unit name Position held in shareholder unit shareholder unit Ji Zhijian Dalian Bingshan Group Co., Ltd. Chairman of the Board, President Yes Fan Wen Dalian Bingshan Group Co., Ltd. Vice President Yes 23 Office holding in other units √ Applicable □ Not applicable If receiving remuneration or name unit name Position held in other unit allowance from other unit Dalian Zhong Huida Refrigeration Technology Co., Ltd. Chairman No Ji Zhijian Linde Engineering (Dalian) Co., Ltd. Chairman No Sonyo Compressor (Dalian) Co., Ltd. Chairman No Dalian Bingshan Air-Conditioning Equipment Co., Ltd Chairman No Dalian Niweisi LengNuan Technology Co., Ltd Chairman No Fan Wen Dalian Bingshan Ryosetsu Quick Freezing Equipment Co., Ltd Chairman No MHI Bingshan Refrigeration (Dalian) Co., Ltd. Chairman No Dalian Bingshan Engineering & Trading Co., Ltd. Chairman No Wuhan New World Refrigeration Industrial Co., Ltd. Chairman No Sonyo Refrigeration (Dalian) Co., Ltd. Chairman No Cai Liyong Sonyo Refrigeration System (Dalian) Co., Ltd. Chairman No Dalian Bingshan Group Construction Co., Ltd Chairman No China Railway Tielong Container Logistics Co., LTD. Independent director Yes Liu Yuanyuan Kincai (Liaoning) Life Science and Technology Co., LTD. Independent director Yes Harbin Hattou Investment Co., LTD. Independent director Yes Yao Hong Fushun Special Steel Co. LTD Independent director Yes 3. Remuneration paid to directors, supervisors, and senior management Decision-making procedure, decision-making basis and actual payment of remuneration for directors, supervisors and senior management Decision-making procedure: the Company's remuneration plan for directors and supervisors was proposed by the Company's Remuneration and Evaluation Committee of the Board of Directors, and after approval by the Board of Directors, submitted to the general meeting for adoption and put into effect. The Company’s remuneration plan for senior management was put into effect after approval by the Company’s Board of Directors. Decision-making basis: it was decided on the basis of main responsibilities and importance of the concerned position and the remuneration level of similar positions in other similar enterprises and evaluated and rewarded through the Company’s examination procedure for assets operation performance. The total amount of remunerations actually ( pre-tax ) paid by the Company to directors, supervisors, and senior management was 5,033,700 yuan. Particulars about the annual remuneration of directors, supervisors and senior staff members Annual remuneration and allowance( pre-tax )paid by the Company Name (ten thousand yuan) Ji Zhijian 0 Yin Xide 107.88 Yokoo Sadaaki 0 Nishimoto Shigeyuki 0 Song Wenbao 64.73 Zhai Yunling 8 Liu Yuanyuan 8 Yao Hong 8 24 Hu Xitang 80.34 Dai Yuling 0 Li Sheng 35.61 Lu Jun 64.27 Yang Fuhua 63.53 Wang Jinxiu 63.01 Total 503.37 VI. Performance of directors' duties during the reporting period 1.The situation of the board of Directors during this reporting period The meeting time Date of meeting Date of disclosure The meeting resolution 13th Meeting of 9th Session of the Board April 25,2023 April 26,2023 http://www.cninfo.com.cn 14th Meeting of 9th Session of the Board May 4,2023 May 5,2023 http://www.cninfo.com.cn 15th Meeting of 9th Session of the Board June 27,2023 June 28,2023 http://www.cninfo.com.cn 16th Meeting of 9th Session of the Board August 25,2023 August 26,2023 http://www.cninfo.com.cn 17th Meeting of 9th Session of the Board October 26,2023 October 27,2023 http://www.cninfo.com.cn 18th Meeting of 9th Session of the Board November 23,2023 November 24,2023 http://www.cninfo.com.cn 2. Attendance of directors at the board of directors and general meetings of shareholders During the reporting period, all directors were present in person at all board meetings where they were required to be present. 3.Objections raised by directors to matters related to the company □ Applicable √ Not applicable 4. Other instructions for the performance of directors' duties □ Applicable √ Not applicable VII. Execution of duties of the special committees under the Board of Directors in the reporting period The audit committee under the Board of Directors of the Company performs its duties in accordance with the detailed rules for the implementation of the audit committee under the Board of Directors and the working procedures for the annual report of the audit committee, supervises the Company's internal audit system and its implementation, reviews the Company's financial information and its disclosure, and evaluates the work of external audit institutions. In the evaluation of the Company's internal control, the audit committee actively plays its responsibilities of organization, leadership and supervision. According to the identification standard of internal control defects of the Company, the annual internal control evaluation report of the Company was reviewed, and ShineWing Certified Public Accountants was entrusted to conduct internal control audit. It is considered that the current situation of the Company's internal control system meets the relevant requirements and has been well implemented. The annual internal control evaluation report of the Company truthfully reflects the above facts. During the annual audit of the company, the audit committee actively communicated and effectively coordinated with the audit institution ShineWing certified public accountants. Before and after the audit, we have repeatedly urged the audit institutions to promote the audit work with quality and quantity on the audit work plan and work progress. After the completion of the audit, the annual financial report and annual report of the company were carefully reviewed, and it was considered that the financial report of the company was comprehensive and true, and the financial report and other information disclosed by the company were objective and true, which truly 25 reflected the annual financial situation of the company. The Audit Committee believes that ShineWing Certified Public Accountants can abide by the independent, objective and fair practice standards in providing annual audit services for the Company, audit the Company in strict accordance with the new accounting standards, actively communicate with the audit committee and independent directors, be diligent and responsible, and better complete the annual audit of the Company. The remuneration and assessment committee under the Board of Directors of the Company performed its duties in accordance with the implementation rules of the remuneration and assessment committee of the Board of Directors of the Company, and reviewed the annual remuneration of the directors, supervisors and senior managers of the Company. VIII. Work of the Board of Supervisors Was there any risk with the Company found by the Board of Supervisors in their supervision activities in the reporting period? □ Applicable √ Not applicable The Board of Supervisors had no objections to the matters under supervision in the reporting period. IX Status of the Company's staff 1. As of Dec. 31, 2023 the Company and its subsidiary had 4,323 enrolled employees, including 2,451 persons engaged in production; 567 persons engaged in marketing; 560 persons engaged in engineering and technology; 78 persons engaged in financing; and 667 persons engaged in management. 2. As of Dec. 31, 2023, among enrolled employees of the Company and its subsidiary, 145 persons have the educational background of Master or higher; 1,336 persons have the educational background of university; 1,332 persons have the educational background of junior college; and 1,510 persons have the educational background of secondary technical school or lower. 3. The Company applied the employee job performance wage system with distribution according to positions and performance of an employee. 4. The Company formulated the annual training plan and gave purposeful training to an employee in consideration of his/her post requirement. 5. Labor outsourcing □ Applicable √ Not applicable X. Profit distribution and dividend payment By giving consideration to both the return to shareholders and the Company's long-term development, and in combination of the Company's profit made in this year, the Company formulated the 2021 annual dividend distribution plan of paying the cash of 0.1 yuan for every 10 shares. Reviewed and adopted at the Company's general meeting, the Company's Board of Directors has implemented the plan in July 2023. Formulation and implementation of the Company's cash dividend distribution policy in the reporting period complied with the Company's Articles of Association and the general meeting's resolution, and the dividend distribution standard and proportion were defined and clear and the applicable decision-making procedure and system were complete. The independent directors agreed on it and the legal rights and interests of minority shareholders were well protected. Special notes to cash dividend payout policy If the regulations of the Articles of Association or the requirements of the shareholders of Yes the company meeting are met: If the dividend payout standard and proportion is definite and clear-cut: Yes If relevant decision-making procedure and mechanism is complete: Yes If the independent directors have performed their duties and played their due role: Yes If small and medium shareholders have the opportunity to sufficiently express their Yes opinions and appeals and if their legal rights and interests are sufficiently protected: If the condition and procedure for adjusting or changing the cash dividend payout policy Yes is compliant and transparent: The Company made profit in the reporting period and the undistributed profit of the parent company was positive 26 but no cash dividend distribution plan was proposed. □ Applicable √ Not applicable Profit distribution preplan, and preplan of share-granting with capital accumulation fund of the Company Bonus shares to be presented for every 10 shares (shares) 0 Dividend to be distributed for every 10 shares (RMB yuan) (including tax) 0.3 Equity base for distribution preplan (shares) 843,212,507 Total amount of cash dividend distribution (RMB yuan) (including tax) 25,296,375.21 Profit distributable to the shareholders in the current year 1,022,296,513.94 Proportion of cash dividend distribution accounting for total profit distribution 100% Cash dividend distribution policy: When the development stage of the company belongs to a growth period with important fund disbursement arrangement(s), the proportion of cash dividend distribution accounting for this profit distribution should reach 20% at minimum when conducting profit distribution. Notes to details about preplan for profit distribution or capital stock increase with capital reserve According to the audit by ShineWing CPAs (Special General Partnership), the net profit made by the parent company of the Company in 2023 was RMB 104.265 million and 10% of the net profit(RMB 10.426 million) was drawn as the legal surplus reserve. Therefore, the profit distributable to the shareholders in the current year was RMB 93.839 million. Plus the initial undistributed profit of RMB 936.889 million and minus the dividend of RMB 8.432 million of common shares paid in 2022,the accumulated profit distributable to the shareholders was RMB1, 022.296 million. The Company’s profit distribution preplan for 2023: Based on the net profit made by the parent Company of the Company in 2023 (104.265 million), 20% of the net profit (RMB 20.853 million) will be drawn as the free surplus reserve; Based on the total capital stock of 843,212,507 shares, the dividend of RMB 0.3 in cash (including tax) will be distributed for every 10 shares, the total cash dividend is RMB 25.296 million, and the cash dividend for B share is converted and paid in Hong Kong dollars. The above preplan shall be submitted to the 2023 shareholders’ general meeting for review and approval. XI.The implementation and effect of equity incentive □ Applicable √ Not applicable XII.Internal control system construction and implementation during the reporting period 1. Internal control construction and implementation During the reporting period, the Company made positive innovation, took the initiative to change, and vigorously promoted organizational strengthening. Implement market-centered integrated operation through organizational restructuring, business process reengineering and management system revision. Through the project management system, fully implement the project budget, control the whole process of operation, ensure profits and prevent risks. 2. Details of material weakness in the internal control found in the reporting period described in the report on self-evaluation of internal control. □ Applicable √ Not applicable There was no material weakness in the internal control found in the reporting period. XIII.Management and control of subsidiaries during the reporting period During the reporting period, the Company focused on strengthening the management control of subsidiaries from the following aspects: (1) The Company carefully identified, strictly managed and dynamically adjusted the directors, supervisors and senior managers assigned to subsidiaries; (2) The Company participated in the whole process of the preparation of the annual business plan of its subsidiaries, made reasonable suggestions and gave appropriate guidance; (3) The Company conducted monthly/quarterly tracking and annual assessment on the implementation of business 27 plans and compliance operations of subsidiaries. During the reporting period, in order to further strengthen the main business of cooling and heating, the Company acquired 100% equity of Panasonic Refrigeration after a major asset restructuring in 2022. The integration plan for the aforementioned restructuring in terms of business, assets, finance, personnel, institutions, etc. is detailed in the Company's "Draft Report on Major Asset Purchase and Related Party Transactions (Revised Draft)". The relevant integration plan is being implemented in an orderly manner. XIV.Report on self-evaluation of internal control or internal control audit report 1. Report on self-evaluation of internal control Details of material weakness in the internal control found in the reporting period described in the report on self-evaluation of internal control There was no material weakness in the internal control found in the reporting period. Date of disclosing the full text of the report on Apr.26, 2024 self-evaluation of internal control Disclosure reference to the full text of the For the 2023 annual report on self-evaluation of internal control report on self-evaluation of internal control of the Company, visit the website www.cninfo.com.cn. 2. Internal control audit report Description of the deliberation opinions in the internal control audit report We think that as of Dec. 31, 2023, Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd. had maintained an effective internal control over the financial reports in all material aspects according to Basic Enterprise Internal Control Specification and relevant regulations. Date of disclosing the full text of Apr. 26, 2024 the internal control audit report Disclosure reference to the full text For the 2023 annual internal control audit report of the Company, visit the of the internal control audit report website www.cninfo.com.cn. Did the accounting firm issue the internal control audit report with nonstandard opinions? □ Applicable √ Not applicable Was the internal control audit report issued by the accounting firm consistent with the opinion in the self-evaluation report of the Board of Directors? √Yes □ No XV. Rectification of problems in self inspection of special actions for governance of listed companies None 28 Section 5 Environmental and social responsibility I.Major environmental issues The listed company and its subsidiaries whether belong to heavy pollution industry formulated by the state environmental protection department √Yes □ No Bingshan Sonyo Compressor (Dalian) Co., Ltd., and Wuhan New World Refrigeration Industry Co., Ltd, subsidiaries of the Company, are key pollutant discharge units announced by the environmental protection department. Administrative penalties imposed for environmental problems during the reporting period □Yes √ No II.Social responsibilities The specific content of the Company's performance of social responsibility can be found in the Social Responsibility Report disclosed on Juchao information website on April 26, 2024. III. We consolidated and expanded our achievements in poverty alleviation and rural revitalization In 2023, the Company continued to consolidate and expand the achievements of poverty alleviation and rural revitalization, and invested 60,000 yuan in the construction of a rural street lighting project to connect and communicate with Songlin Village, Guangming Mountain Town, Zhuanghe City. The Company also carried out daily maintenance of the air conditioning equipment in the village cultural activity center. In addition, the Dalian Jinpu New Area Bingshan Hope Middle School and Bingshan Hope Book Corner, jointly funded by the Company and investing enterprises with 250,000 yuan, were unveiled on December 28, 2023. 29 Section 6 Important items I Implementation of commitments 1. Commitments of the Company or its shareholders holding 5% or higher of the shares in the reporting period or carried to the reporting period √Applicable □Not applicable According to the relevant provisions of the "Self regulatory Guidelines for Listed Companies on the Shenzhen Stock Exchange No. 8- Major Asset Restructuring", the important commitments and performance made by relevant parties during the 2022 major asset restructuring process of the Company are detailed in the Company's announcement on the performance of commitments made by relevant parties during the major asset restructuring disclosed on CNINFO on April 26, 2024. 2. The company's assets or projects have earnings forecasts, and the reporting period is still in the period of earnings forecasts. The company explains the reasons why the assets or projects have reached the original earnings forecasts. □Applicable √Not applicable II. Non-operation capital occupation by holding shareholders and their related parties in the listed company □Applicable √Not applicable The Company had no capital occupation by the holding shareholders and their related parties in the listed company within this reporting period. III. Foreign guarantee in violation of regulations □ Applicable √ Not applicable IV. Explain to the “non standard audit report” last year from the board of directors of the Company □Applicable √Not applicable V. Explain to the “non standard audit report” from the board of directors, board of supervisors of the Company □Applicable √Not applicable VI. Change in accounting policies, accounting estimates and accounting methods or correction of major accounting mistakes in the reporting period, which should be retroactively restated compared with the financial statements of the previous year √Applicable □Not applicable On November 30, 2022, the Ministry of Finance issued Interpretation No. 16 of the Accounting Standards for Enterprises, which stipulates that "deferred income tax related to assets and liabilities arising from individual transactions shall not be subject to the accounting treatment of initial recognition exemption" and shall come into effect from January 1, 2023. Due to the release of the above accounting standards interpretation, the Company needs to make corresponding changes to accounting policies and implement the above accounting standards from the effective date specified in the above documents. The Company implemented the relevant provisions of Accounting Standard Interpretation No. 16 from January 1, 2023, and made retrospective adjustments to the relevant items of the consolidated financial statements for the year 2022. VII. Change in the range of consolidated statements compared with the financial statements of the previous year √Applicable □Not applicable The entity included in the consolidated financial statements this year has increased by one compared to the previous year. During the reporting period, the Company acquired 40% equity of Panasonic Refrigeration (Dalian) Co., Ltd. ("Panasonic Refrigeration") held by Panasonic Electric (China) Co., Ltd; Acquired 60% equity of Panasonic Refrigeration held by Sanyo Electric Co., Ltd. After the completion of the equity transfer, the Company holds 100% equity of Panasonic Refrigeration and is included in the scope of consolidation. 30 VIII. Engagement and dismissal of the accounting firm Currently engaged accounting firm Name of domestic accounting firm ShineWing CPAs (Special General Partnership) Remuneration paid to the domestic accounting firm (in 10 thousand yuan) 107 Continuous audit service years of the domestic accounting firm 8 Name of certified public accountants with the domestic accounting firm Sui Guojun, Zhang Shizhuo Continuous audit service years of the certified public accountants Sui Guojun 1 year, Zhang Shizhuo 3 years If the CPA firm retaining was changed in this period □Applicable √Not applicable Employment of internal control audit accounting firm, financial advisor or sponsor √ Applicable □ Not applicable During the reporting period, the Company hired ShineWing CPAs (Special General Partnership) as the Company's 2023 audit institution to conduct an integrated audit of the Company's financial reports and internal control. IX. Facing suspend and terminate listing after the annual report disclosure □ Applicable √ Not applicable X. Bankruptcy restructuring related matters □ Applicable √ Not applicable XI. Major lawsuit and arbitration issues □ Applicable √ Not applicable XII. Punishment and rectification □ Applicable √ Not applicable XIII.The credibility of companies and its controlling shareholder, actual controller √ Applicable □ Not applicable The controlling shareholder of the Company and the Company don’t exist situation such as unfulfilled the court’s effective judgments or failed to pay duly a large amount of debt during the reporting period. XIV.Important associated transactions 1. Related party transactions related to daily operations During the reporting period, the total amount of normal associated transactions between the Company and associated parties was 784.78 million yuan, accounting for 94.71% of the budgeted amount for the year 2023. This included 207.66 million yuan, accounting for 80.64% of the budgeted amount for the year 2023, for purchasing supporting products for package projects from associated parties, and 577.12 million yuan, accounting for 101.05% of the budgeted amount for the year 2023, from selling supporting parts and components to associated parties. Associated transactions related to purchases or sales of assets □Applicable √ Not applicable Important associated transactions with joint external investments □ Applicable √ Not applicable 4. Associated transactions related to rights and debts □ Applicable √ Not applicable 5. Associated transactions with related financial companies □ Applicable √ Not applicable 6. The transactions between the financial company controlled by the company and its related parties □ Applicable √ Not applicable 7. Other associated transactions √ Applicable □ Not applicable In order to strengthen business collaboration and provide more optimized solutions for energy conservation and environmental protection for customers, the Company signed a conditional and effective equity transfer agreement with Panasonic China and Sanyo Electric on May 4, 2023, acquiring 40% equity of Panasonic Refrigeration held by Panasonic China and 60% equity of Panasonic Refrigeration held by Sanyo Electric. The equity transfer was completed in June 2023, and the Company holds 100% equity in Panasonic Refrigeration. 31 XVII. Major contract and its performance 1. Hosting, contracting and leasing status (1) the hosting status □ Applicable √ Not applicable (2)the contracting status □ Applicable √ Not applicable (3) the leasing status √ Applicable □ Not applicable The 13th meeting of the 7th board of directors of the Company was held on April 22, 2017, and approved to rent out the old plant and land located in No 888, South West RD, Shahekou Districit, Dalian to Bingshan Wisdom. The lease contract is from April 1, 2017 to December 31, 2036. The Company has signed the “estate leasing contract” with Dalian Bingshan Wisdom based on the requirement of utilization of old land and plant and new business foster plan. Current year’s lease premium is RMB 9.01 million. On July 31, 2014, the Company and Lingzhong Bingshan Refrigeration (Dalian) Co., Ltd. signed a supplementary agreement to modify the house lease contract, and rent out the Building No. 6 of Workshop No. 106, Liaohe East Road, Dalian Development Zone, to Lingzhong Bingshan Refrigeration (Dalian) Co., Ltd.. The rental area is 15,259.04 square meters, and lease period will end on July 16, 2029, the annual rent is RMB 3.81 million. 2. Guaranteeing status √Applicable □ Not applicable China Development Fund provides support for the Company's cold chain green intelligent equipment and service industrialization base project, and provides special funds to the controlling shareholder of the Company, Bingshan Group. The above-mentioned special fund amount is 160 million yuan, with a term of 10 years and a rate of 1.2%. After the above special funds are in place, Bingshan Group has fully allocated them to the Company in a one-time manner without increasing the rate. The implementation of the above-mentioned special funds requires the Company to provide guarantees and continue until the reporting period. This guarantee is in the form of a guarantee for the controlling shareholder, but in fact, it is a guarantee for the Company to obtain financial support for itself. The Company provides guarantees for clients Guizhou Waterfall Cold Chain Food Investment Co., Ltd., Liuyang Zhongjie Technology Investment Co., Ltd., Shandong Jiechuang Energy Technology Co., Ltd., and Shaanxi Yiming Food Co., Ltd. based on financing leasing business, which will continue until the reporting period. In the normal performance of the above-mentioned project, the guaranteed shareholder and relevant natural persons provided the company with full joint and several liability guarantee and counter guarantee, and the overall guarantee risk of the Company is controllable. The Company provides guarantees to its client Jilin Fuyu Agricultural Technology Co., Ltd. based on financing leasing business. The guarantor has good qualifications, and the guarantor's shareholders and related natural or legal persons have provided the company with full joint liability guarantee and counter guarantee. The overall risk of the Company's guarantee is controllable, and it has not harmed the legitimate rights and interests of the company and small and medium-sized shareholders. The above guarantee matters have been reviewed by the board of directors and are being fulfilled normally. 3. Entrust others to cash assets management (1)Trust management □Applicable √Not applicable (2)Entrusted loans □Applicable √Not applicable (3)Other important contracts □ Applicable √ Not applicable 32 XIX. Other important matters □ Applicable √ Not applicable XX. Other important matters of subsidiary company □ Applicable √ Not applicable 33 Section 7 Change in Share Capital and Shareholders' Information I. Change in share capital 1. Change in share capital Shares Shares (before change) (after change) items number proportion number proportion I. Non-circulating share capital with restricted trade 1,670,894 0.20% 1,670,894 0.20% conditions II. Circulating share capital 841,541,613 99.80% 841,541,613 99.80% 1. Domestically listed ordinary shares 600,041,613 71.16% 600,041,613 71.16% 2. Domestically listed foreign shares 241,500,000 29.64% 241,500,000 29.64% III. Total shares 843,212,507 100.00% 843,212,507 100.00% Approval of changes in shares □ Applicable √Not applicable The restricted shares changes □ Applicable √Not applicable II. Securities issuance and listing 1. Securities issuance in the report period □ Applicable √ Not applicable 2. Change in total shares of the Company and structure of shareholders □ Applicable √ Not applicable 3. Internal staff shares □ Applicable √ Not applicable III. Shareholders and actual controller 1. Number of shareholders and their shareholding Total number of shareholders in the Total number of shareholders as of the last month before 48,029 53,903 reporting period disclosure of the annual report Shareholding of top ten shareholders Number of Number of Proporti shares with pledged Name Nature Total number on sale shares or restriction shares frozen Domestic non-state-owned Dalian Bingshan Group Co., Ltd. 20.27% 170,916,934 0 0 legal person Sanyo Electric Co., Ltd. Overseas legal person 8.72% 73,503,150 0 0 Everyone's Assets - Shengshi Selected No.2 Others 1.29% 10,847,212 Collective Asset Management Product (Phase 2) Chen Xianlai Domestic natural person 0.87% 7,326,500 Lin Zhenming Foreign natural person 0.80% 6,730,000 Cao Yifan Domestic natural person 0.54% 4,529,700 J. P. Morgan Securities PLC-own funds Overseas legal person 0.52% 4,361,703 Zhang Sufen Domestic natural person 0.48% 4,020,000 34 Dongfanghong JD Big Data Flexible Allocation Others 0.47% 4,000,017 Hybrid Securities Investment Fund Xue Hong Domestic natural person 0.43% 3,640,000 Shareholding of top ten shareholders without sale restriction Number of shares Name Type of shares without sale restriction Dalian Bingshan Group Co., Ltd. 170,916,934 RMB denominated ordinary shares Sanyo Electric Co., Ltd. 73,503,150 Domestically listed foreign shares Everyone's Assets - Shengshi Selected No.2 Collective Asset 10,847,212 RMB denominated ordinary shares Management Product (Phase 2) Chen Xianlai 7,326,500 RMB denominated ordinary shares Lin Zhenming 6,730,000 Domestically listed foreign shares Cao Yifan 4,529,700 Domestically listed foreign shares J. P. Morgan Securities PLC-own funds 4,361,703 RMB denominated ordinary shares Zhang Sufen 4,020,000 RMB denominated ordinary shares Dongfanghong JD Big Data Flexible Allocation Hybrid Securities 4,000,017 RMB denominated ordinary shares Investment Fund Xue Hong 3,640,000 Domestically listed foreign shares Dalian Bingshan Group Co., Ltd. had the association Notes to the associated relationship and uniform actions of the above relationship with Sanyo Electric Co., Ltd. among the above shareholders shareholders. Sanyo Electric Co., Ltd. holds 26.6% of Dalian Bingshan Group Co., Ltd.'s equity. Explanation on the participation of the top 10 ordinary shareholders None in margin trading and securities lending business 2. Controlling shareholder of the Company Legal Founding Unified social Name of holding shareholder Main business representative date credit code Research, development, manufacture, sales, service and installation of industrial refrigeration products, freezing and cold storage products, 91210200241 large-, medium- and small-size air-conditioning Dalian Bingshan Group Co., Ltd. Ji Zhijian Jul. 3, 1985 2917931 products, petrochemical equipment products, electronic and electric control products, home appliance products and environment protection products. Shares held by the holding shareholder in other overseas and domestic listed companies as the None holding shareholder or ordinary shareholder in the reporting period Change in the holding shareholder in the reporting period □ Applicable √ Not applicable 35 3. Actual controller of the Company The company has no actual controller. According to the actual situation of the Company and its controlling shareholder, and compared with the related laws and regulations including Company Law of People’s Republic of China, Management Regulation on Listing Company Acquisition and Stock Listing Rules of Shenzhen Stock Exchange, with the confirmation of Liaoning Huaxia law firm, the Company released the Public Notice on Not Having Actual Controller.(No: 2015-025),) which was published on B04 of China Securities, A19 of HK Commercial Daily and Cninfo website on April 24 2015. Commission ofDalian Municipality Government State-owned Assets Supervision and Administration Dalian State-owned Assets Management Co., Ltd. Dalian Equipment Manufacture Investment Panasonic Corporation of China Dalan Zhonghuida Refrigeration Sanyo Electric Co., Ltd. Dayang Co., Ltd. Technology Co., Ltd. Co., Ltd. 100% 100% 24.97% 8.28% 13.3% 20.2% 26.6% 6.65% Dalian Bingshan Group Co., Ltd. 20.27% Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd. The actual controller controlled the Company through a trust or other asset management □ Applicable √ Not applicable 4. Other legal-person shareholders holding of 10% or more shares □ Applicable √ Not applicable 5.、controlling shareholders, actual controllers, restructuring the constraint to the stake and other commitments underweight □ Applicable √ Not applicable 36 Section 8 Information on Preferred Stock □ Applicable √ Not applicable In the reporting period, the Company didn’t own preferred stock. 37 Section 9 Information on Corporate bonds □ Applicable √ Not applicable In the reporting period, the Company didn’t own corporate bonds. 38 Section 10 Financial Report 1. Opinion We have audited the accompanying financial statements of Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd (“Bingshan Refrigeration & Heat Company”), which comprise the consolidated and company balance sheets as at 31 December 2023, and the consolidated and company income statements, the consolidated and company cash flow statements, the consolidated and company statements of changes in equity for the year then ended, and notes to these financial statements. In our opinion, the accompanying financial statements have been prepared in accordance with the requirements of Accounting Standards for Business Enterprises, in all material respects and present fairly the consolidated and the financial position of Bingshan Refrigeration & Heat Company as at 31 December 2023, and of their consolidated and the company’s financial performance and cash flows for the year then ended. 2. Basis for Opinion We conducted our audit in accordance with China Standards on Auditing for Chinese Certified Public Accountants. Our responsibilities under those standards are further described in the “Auditor’s Responsibilities for the Audit of the Financial Statements” section of our report. We are independent of Bingshan Refrigeration & Heat Company in accordance with the Code of Ethics for Chinese Certified Public Accountants, and we have fulfilled our other ethical responsibilities of the code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit. 3. Key Audit Matters Key audit matters are those matters that we consider, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole and, in forming our audit opinion thereon, and we do not express a separate opinion on these matters. Revenue Recognition Key Audit Matter How the matter was addressed in the audit As stated in the Note ‘ No.44,VI. The main audit procedures carried out for addressing the key audit Notes to Consolidated Financial matters are as follows: Statements’, revenue on the 1. Understand and evaluate effectiveness of design and operation of the management’s internal control over revenue consolidated statements for the year 2. Carried out analytical review and evaluate the reasonableness of ended as of December 31, 2023, is sales income and gross profit margin by segmenting the business and 4,815.9415 million Yuan. Revenue sales in conjunction with industry development and actual situation of Bingshan Refrigeration & Heat 39 Company and its subsidiaries of Bingshan Refrigeration & Heat Company. mainly come from sales of products 3. Sampling test the sales contracts, identify the clause and and installation project. We consider condition in respect to the contract performance obligation, consideration and risk and reward transfer of the ownership. the revenue as the key audit matter, Evaluate the revenue recognition of Bingshan Refrigeration & Heat because of the significance of Company whether it is in line with the accounting standards. revenue to the overall financial 4. Sampling select product sales revenue record, reconcile to sales statements, and also the inherent invoice, contracts, dispatch note, acceptance note; Sampling select risk of revenue manipulation by the installation sales revenue record, reconcile to invoice, installation management so for the special contracts and completion report and Evaluate the recognition of purpose. revenue whether is in line with the accounting standards 5. Checking actual installation cost by reviewing the contract budget, contract, invoice and supportive document with signature for the equipment received to evaluate the cost whether it really incurred. 6. Combined with receivable audit, perform confirmation procedures for key clients 7. Perform cut-off test so to ensure whether the transaction is recorded into the appropriate accounting period. 4. Other Information The management of Bingshan Refrigeration & Heat Company (hereinafter referred to as the “Management”) is responsible for the other information. The other information comprises the information included in the Bingshan Refrigeration & Heat Company 2023 annual report, but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact. We have nothing to report in this regard. 5. Responsibilities of the Management and Those Charged with Governance for the Financial Statements The Management is responsible for the preparation of the financial statements in accordance with Accounting Standards for Business Enterprises to achieve fair presentation; and designing, implementing and maintaining internal control which is necessary to enable that the financial statements are free from material misstatement, whether due to fraud or error. 40 In preparing the financial statements, the Management is responsible for assessing Bingshan Refrigeration & Heat Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Management either intends to liquidate Bingshan Refrigeration & Heat Company or to cease operations, or have no realistic alternative but to do so. Those charged with governance are responsible to overseeing Bingshan Refrigeration & Heat Company’s financial reporting process. 6. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are generally considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. During the course of audit in accordance with auditing standards, we exercise professional judgment and maintain professional skepticism. We also carry out the following works: (1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our audit. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of its internal control (this sentence would be deleted in circumstance when we are also responsible to issue an opinion on the effectiveness of internal control in conjunction with the audit of the financial statements). (3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Management. (4) Conclude on the appropriateness of the Management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Bingshan Refrigeration & Heat Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements in accordance with the auditing standards or, if such disclosures are inadequate, we shall modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, 41 future events or conditions may cause Bingshan Refrigeration & Heat Company to cease to continue as a going concern. (5) Evaluate the overall presentation, structure and content of the financial statements, and also whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. (6) Obtain sufficient and appropriate audit evidence with respect to the financial information of Bingshan Refrigeration & Heat entities or business activities, and issue an audit opinion. We are responsible for guiding, supervising and performing group audits and take full responsibility for audit opinions. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings etc., including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with those relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence and related safeguards, where applicable. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation prohibited public disclosure about the matter or when, in rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. ShineWing Certified Public Accountants( LLP) CPA:Sui Guojun (Engagement Partner) CPA:Zhang Shizhuo China, Beijing April 24, 2024 42 Consolidated Balance Sheet Name of Enterprise:Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd Amount Unit:RMB ITEMS 31 December 2023 01 January 2023 Current Assets: Monetary funds 951,039,570.11 1,006,165,899.18 Settlement provision Loans to banks and other financial institutions Financial asset held for trading Derivative financial assets Notes receivable 353,428,922.42 505,945,261.18 Accounts receivable 1,576,433,924.16 1,409,978,442.95 Receivable financing 303,585,218.53 58,792,792.70 Prepayments 153,388,660.48 171,991,468.12 Insurance receivables Reinsurance Receivable ProVsion of reinsurance contract reserve receivable Other receivables 41,396,223.27 51,394,474.24 including: interest receivable diVdend receivable 14,495.00 14,495.00 Financial assets purchased under agreement to resell Inventories 1,638,139,479.14 1,395,344,780.24 Contractual asset 237,076,878.71 225,790,875.78 Held for sale assets Non-current assets due within 1-year 15,715,631.52 Other current assets 26,074,342.33 33,499,577.60 Total Current Assets 5,280,563,219.15 4,874,619,203.51 Non-Current Assets: Loan and payment on other's behalf disbursed Debt investment Other debt investment Long-term receivables 5,162,458.90 Long-term equity investment 521,274,947.50 562,987,771.94 Other equity instrument investment Other non-current financial assets 164,024,771.63 149,950,861.31 Investments properties 123,589,681.50 115,332,918.20 43 Fixed assets 1,291,851,402.46 1,229,029,368.93 Construction in process 114,801,351.21 115,577,902.54 Production biological assets Oil-gas assets Right-of-use assets 30,548,057.08 30,941,662.26 Intangible assets 210,554,161.22 168,076,720.07 Development cost Goodwill 286,402,171.93 248,345,508.41 Long-term prepaid expense 5,346,321.60 6,486,566.92 Deferred tax asset 113,648,859.53 95,424,386.61 Other non-current assets 20,243,349.44 Total Non-current Assets 2,882,285,075.10 2,727,316,126.09 Total Assets 8,162,848,294.25 7,601,935,329.60 legal representative:Ji Zhijian head of the accounting work:Wang Jinxiuthe person in charge of the accounting office:Li Sheng 44 Consolidated Balance Sheet (continued) Name of Enterprise:Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd Amount Unit:RMB ITEMS 31 December 2023 01 January 2023 Current Liabilities: Short-term borrowings 262,287,784.38 274,052,990.15 Loans from central bank Loans from other banks Financial liability held for trading Derivative financial liabilities Notes payable 670,720,999.48 618,944,384.85 Accounts payable 1,655,835,363.01 1,586,098,060.59 Advance received Contractual liability 787,685,294.53 647,645,820.57 Financial assets sold under agreements to repurchase Deposits received and hold for others Entrusted trading of securities Entrusted underwriting of securities Employee pay payables 149,497,113.46 118,216,683.23 Taxes and duties payable 22,216,492.26 33,691,523.62 Other payables 278,804,152.17 67,054,250.25 including: interest payable dividend payable 533,156.00 533,156.00 Fees and commissions payable Amount due to reinsurance Held for sale liabilities Non-current liabilities due within 1-year 150,645,347.64 63,105,954.56 Other current liabilities 203,315,864.43 204,650,003.24 Total Current Liabilities 4,181,008,411.36 3,613,459,671.06 Non-current Liabilities: Insurance contract provision Long-term borrowings 679,700,000.00 715,100,000.00 Bonds Payable including: preference share perpetual debt Lease liability 24,134,986.97 11,230,532.05 Long-term payables 10,331,937.30 31,009,644.16 Long-term employee payables Provision 4,544,802.88 18,805,967.43 Deferred income 98,274,267.80 99,754,346.39 Deferred Tax liabilities 60,811,462.07 52,384,532.28 Other non-current liabilities Total Non-current Liabilities 877,797,457.02 928,285,022.31 Total Liabilities 5,058,805,868.38 4,541,744,693.37 Owners Equity(or Shareholders Equity): 45 Paid-in capital(Share capital) 843,212,507.00 843,212,507.00 Other equity instrument Including:preference share perpetual capital securities Capital reserve 717,097,098.38 717,097,098.38 Less: Treasury stock Other comprehensive income 2,208,669.73 2,208,669.73 Chartered reserve 449,374.96 Surplus reserves 867,159,439.34 825,222,039.39 △Provision for general risk Undistributed profit 617,386,488.34 618,380,112.53 Equity attributable to equity holders of the Company 3,047,513,577.75 3,006,120,427.03 *Minority interest 56,528,848.12 54,070,209.20 Total Equity 3,104,042,425.87 3,060,190,636.23 Total Liabilities and Equity 8,162,848,294.25 7,601,935,329.60 legal representative:Ji Zhijian head of the accounting work:Wang Jinxiuthe person in charge of the accounting office:Li Sheng 46 Balance Sheet of Parent Company Name of Enterprise:Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd Amount Unit:RMB ITEMS 31 December 2023 01 January 2023 Current Assets: Monetary funds 177,430,880.63 361,446,559.26 Tradable financial asset Derivative financial assets Notes receivable 64,984,113.98 100,218,283.64 Accounts receivable 612,933,182.91 629,954,649.50 Receivable financing 13,562,917.97 12,451,483.74 Prepayments 62,988,427.81 61,446,678.23 Other receivables 138,883,665.74 36,021,805.53 including: interest receivable dividend receivable 110,000,000.00 Inventories 394,763,078.40 342,276,945.65 Contractual assets 106,401,142.42 83,739,043.68 Held for sale assets Non-current assets due within 1-year 15,715,631.52 Other current assets 3,046,484.01 565,836.48 Total Current Assets 1,574,993,893.87 1,643,836,917.23 Non-Current Assets: Debt investment Other debt investment Long-term receivables 5,162,458.90 Long-term equity investment 2,930,381,144.87 2,720,998,153.80 Other equity instrument investment Other non-current financial assets 162,709,629.13 148,635,718.81 Investments properties 86,587,170.43 90,986,890.03 Fixed assets 632,491,373.17 646,432,825.98 Construction in process 42,867,809.00 48,905,875.93 Production biological assets Oil-gas assets Right-of-use assets 13,360,039.29 14,975,625.90 47 Intangible assets 68,437,853.58 72,158,994.17 Development cost Goodwill Long-term unamortized expense 4,434,379.95 5,553,733.11 Deferred tax asset 27,809,290.39 21,597,992.46 Other non-current assets Total Non-current Assets 3,969,078,689.81 3,775,408,269.09 Total Assets 5,544,072,583.68 5,419,245,186.32 legal representative:Ji Zhijian head of the accounting work:Wang Jinxiu the person in charge of the accounting office:Li Sheng Balance Sheet of Parent Company (continued) Name of Enterprise:Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd Amount Unit:RMB ITEMS 31 December 2023 01 January 2023 Current Liabilities: Short-term borrowings 219,000,000.00 234,980,000.00 Financial liability held for trading Derivative financial liabilities Notes payable 172,920,936.32 259,002,815.07 Accounts payable 418,383,161.14 406,794,291.57 Advance received Contractual liability 108,021,877.17 139,622,706.08 Employee pay payables 12,109,637.82 14,557,783.63 Taxes and duties payable 3,523,630.66 9,430,543.11 Other payables 174,010,076.60 21,061,597.80 including: interest payable dividend payable 533,156.00 533,156.00 Held for sale liabilities Non-current liabilities due within 1-year 134,539,973.21 42,972,752.44 Other current liabilities 69,349,185.65 106,146,986.20 Total Current Liabilities 1,311,858,478.57 1,234,569,475.90 Non-current Liabilities: Long-term borrowings 679,700,000.00 715,100,000.00 Bonds Payable including: preference share perpetual debt Lease liability 10,878,947.77 12,613,986.87 Long-term payables 12,908,810.87 48 Long-term employee payables Provision for liabilities Deferred income 61,369,767.80 61,685,846.39 Deferred Tax liabilities 22,714,636.67 20,649,497.74 Other non-current liabilities Total Non-current Liabilities 774,663,352.24 822,958,141.87 Total Liabilities 2,086,521,830.81 2,057,527,617.77 Owners Equity(or Shareholders Equity): Paid-in capital(Share capital) 843,212,507.00 843,212,507.00 Other equity instrument Including:preference share perpetual capital securities Capital reserve 755,146,592.54 755,146,592.54 Less: Treasury stock Other comprehensive income 1,246,569.06 1,246,569.06 Chartered reserve Surplus reserves 867,159,439.34 825,222,039.39 Undistributed profit 990,785,644.93 936,889,860.56 Total Equity 3,457,550,752.87 3,361,717,568.55 Total Liabilities and Equity 5,544,072,583.68 5,419,245,186.32 legal representative:Ji Zhijian head of the accounting work:Wang Jinxiuthe person in charge of the accounting office:Li Sheng 49 Consolidated Income Statement Name of Enterprise:Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd Amount Unit:RMB Item Current year Last year Ⅰ、Total operating revenue 4,815,941,467.70 2,893,085,310.29 Including: Operating revenue 4,815,941,467.70 2,893,085,310.29 Interest income Earned premiums Fees and commission income Ⅱ、Total cost of operation 4,718,340,202.43 2,988,322,715.94 Including: Cost of operation 4,005,597,458.19 2,537,528,841.40 Interest expenses Fees and commission expenses Payments to surrenders of insurance contracts Net amount of insurance claims expenses Net charges of provision for insurance contracts Dividends policy expenses Reinsurance expenses Taxes and surcharges 33,968,677.08 22,061,626.36 Selling and distribution expenses 233,862,026.48 153,735,714.96 Administrative expenses 250,568,245.50 186,378,204.50 R&D 164,185,717.71 76,792,805.69 Financial expenses 30,158,077.47 11,825,523.03 Including: Interest expenses 37,918,133.57 18,581,726.78 Interest income 10,558,433.14 5,850,062.80 add: other income 30,179,668.51 7,173,155.47 investment income (Loss listed with "-") 1,106,628.72 306,688,497.94 Including: income from investments in associates and joint ventures -4,884,731.99 -37,218,861.27 Gain arising from derecognition of financial asset measuredat amortized cost Exchange gain (Loss listed with "-") Gain on hedging of net exposure (Loss listed with "-") Gain on FV change (Loss listed with "-") 14,073,910.32 -46,991,034.40 Loss on impairment of credit(Loss listed with "-") -69,732,055.75 -82,695,388.75 Loss on impairment of assets(Loss listed with "-") -14,405,692.66 -74,825,795.00 Gain on asset disposal(Loss listed with "-") -1,184,930.14 194,556.13 Ⅲ、Operating profit (Loss listed with "-") 57,638,794.27 14,306,585.74 Add: Non-operating income 14,533,922.09 11,841,528.55 Less: Non-operating expenses 6,966,477.53 5,204,540.35 Ⅳ、 Total profit (Loss listed with "-") 65,206,238.83 20,943,573.94 Less: Income tax expenses 11,031,699.08 576,816.28 Ⅴ、Net profit (Net loss listed with "-") 54,174,539.75 20,366,757.66 (I) Classification by continuity 54,174,539.75 20,366,757.66 1、Net profit from continuing operation 54,174,539.75 20,366,757.66 2、Net profit from discontinuing operation (II) Classification by ownership 54,174,539.75 20,366,757.66 1、Net profit attributable to equity holders(shareholders) of the Company 49,375,900.83 18,731,969.48 2、Minority interest 4,798,638.92 1,634,788.18 50 Ⅵ、 Other comprehensive income net off tax 29,988.00 Net other comprehensive income net off tax attributable to equity 29,988.00 holders(shareholders) of the parent company (Ⅰ)Items that may not be reclassified subsequently to the income statement 1.Change in net asset/liability from remeasurment on defined benefit plan 2.Under equity method, proportionate share of other comprehensive income in invested company that may not be reclassified subsequently to 3.FV change of other equity instrument investment 4.FV change of own credit risk 5.Others (Ⅱ)Items that may be reclassified subsequently to the income statement 29,988.00 1.Under equity method, proportionate share of other comprehensive income invested company that may be reclassified subsequently to the income statement 29,988.00 2.FV change of other debt instrument investment 3.Financial assets reclassfied into other comprehensive income 4.Credit impairment provision of other debt investment 5.Cash flow hedges effective portion 6.Foreign currency translation difference 7.Others Net other comprehensive income net off tax attributable to Minority interest Ⅶ、Total comprehensive income 54,174,539.75 20,396,745.66 Total comprehensive income attributable to parent Company 49,375,900.83 18,761,957.48 Total comprehensive income attributable to minority interest 4,798,638.92 1,634,788.18 Ⅷ、 Earnings per share (Ⅰ)Basic earnings per share 0.06 0.02 (Ⅱ)Diluted earnings per share 0.06 0.02 legal representative:Ji Zhijian head of the accounting work:Wang Jinxiuthe person in charge of the accounting office:Li Sheng 51 Income Statement of Parent Company Name of Enterprise:Bingshan Refrigeration & Heat Transfer Technologies Co., LtAmount Unit:RMB Item Current year Last year Ⅰ、Operating revenue 1,147,567,097.70 1,048,142,993.33 Less: Cost of operation 949,400,269.07 909,850,529.59 Taxes and surcharges 12,915,605.84 12,305,882.57 Selling and distribution expenses 58,418,856.46 54,927,585.49 Administrative expenses 83,623,829.67 92,850,447.59 R&D 34,643,670.44 28,982,093.78 Financial expenses 30,961,451.10 12,093,600.10 Including: Interest expenses 30,060,509.49 12,261,980.25 Interest income 928,862.25 2,557,312.33 Add: Other income 13,476,491.91 1,983,356.24 Investment income (Loss listed with "-") 137,165,248.86 289,868,640.72 Including: income from investments in associates and joint ventures -5,506,787.08 -37,651,689.22 Gain arising from derecognition of financial asset measured at amortized cost Gain on hedging of net exposure (Loss listed with "-") Gain on FV change (Loss listed with "-") 14,073,910.32 -46,991,034.40 Loss on impairment of credit(Loss listed with "-") -26,975,462.06 -27,779,271.62 Loss on impairment of assets(Loss listed with "-") -15,398,757.36 -13,966,272.08 Gain on asset disposal(Loss listed with "-") 25,669.74 84,294.67 Ⅱ、Operating profit (Loss listed with "-") 99,970,516.53 140,332,567.74 Add: Non-operating income - 49,394.31 Less: Non-operating expenses 451,394.65 61,252.08 Ⅲ、 Total profit (Loss listed with "-") 99,519,121.88 140,320,709.97 Less: Income tax expenses -4,746,187.51 -17,258,852.19 Ⅳ、Net profit (Net loss listed with "-") 104,265,309.39 157,579,562.16 1、Net profit from continuing operation 104,265,309.39 157,579,562.16 2、Net profit from discontinuing operation Ⅴ、 Other comprehensive income net off tax 29,988.00 (Ⅰ)Items that may not be reclassified subsequently to the income statement 1.Change in net asset/liability from remeasurment on defined benefit plan 2.Under equity method, proportionate share of other comprehensive income in invested company that may not be reclassified subsequently to the income statement 3.FV change of other equity instrument investment 52 4.FV change of own credit risk 5.Others (Ⅱ)Items that may be reclassified subsequently to the income statement 29,988.00 1.Under equity method, proportionate share of other comprehensive income 29,988.00 invested company that may be reclassified subsequently to the income statement 2.FV change of other debt instrument investment 3.Financial assets reclassfied into other comprehensive income 4.Credit impairment provision of other debt investment 5.Cash flow hedges effective portion 6.Foreign currency translation difference 7.Others Ⅵ、Total comprehensive income 104,265,309.39 157,609,550.16 legal representative:Ji Zhijian head of the accounting work:Wang Jinxiuthe person in charge of the accounting office:Li Sheng 53 Consolidated Cash Flow Statement Name of Enterprise:Bingshan Refrigeration & Heat Transfer Technologies Co., LtAmount Unit:RMB Item Current year Last year 1. Cash flows from operating activities: Cash received from sales of goods and rendering of services 4,113,893,219.72 2,299,565,737.92 Net increase in deposits from customers and inter-banks deposits Net increase in loans from central bank Net increase in loans from other financial institutions Cash receipts of premium of direct insurance contracts Net cash received from reinsurance contracts Net increase in deposits from insurance policy holders and investment Cash receipts of interest, fees and commission Net increase in placement from banks and other financial institution Net increase in sales and repurchase operations Entrusted trading of securities Cash received from taxes refund 28,408,313.78 27,845,766.93 Cash received relating to other operating activities 126,828,658.19 92,440,515.31 Sub-total of cash inflows from operating activities 4,269,130,191.69 2,419,852,020.16 Cash paid for goods and services 3,076,384,953.42 1,765,774,138.68 Net increase in loans and disbursement to customers Net increase in deposit with central bank and inter-banks Cash paid for claims of direct insurance contracts Net increase of loans to other banks Cash paid for interest, fee and commission Cash paid for dividends of insurance policies Cash paid to and on behalf of employees 735,972,826.45 392,733,128.51 Payments of taxes and surcharges 190,790,155.61 85,488,578.90 Cash paid relating to other operating activities 290,422,923.95 232,103,473.43 Sub-total of cash outflows from operating activities 4,293,570,859.43 2,476,099,319.52 Net cash flows from operating activities -24,440,667.74 -56,247,299.36 2. Cash flows from investment activities: Cash received from return of investments 304,791,101.68 Cash received from investments income 44,342,521.09 109,215,313.16 Net cash received from disposal of fixed assets, intangible assets and other 1,668,006.05 668,334.46 long-term assets Net cash received from disposal of subsidiaries and other business units 5,264,093.90 Cash received relating to other investing activities Sub-total of cash inflows from investing activities 46,010,527.14 419,938,843.20 Cash paid to acquire fixed assets, intangible assets and other long-term assets 89,321,945.50 50,713,747.56 Cash paid for investments Net increase in pledged deposits Net cash paid to acquire subsidiaries and other business units 12,056,951.02 401,824,582.67 Cash paid relating to other investing activities 168,000,000.00 Sub-total of cash outflow from investing activities 269,378,896.52 452,538,330.23 Net cash flows from investing activities -223,368,369.38 -32,599,487.03 3. Cash flows from financing activities Cash received from investment absorption 54 Including: Cash received by subsidiaries from investment absorpotion of non-controlling interest Cash received from loans granted 385,643,636.90 847,850,000.00 Cash received relating to other financing activities 65,675,932.80 23,991,047.27 Sub-total of cash inflows from financing activities 451,319,569.70 871,841,047.27 Cash paid for settlement of borrowings 341,900,000.00 242,005,111.11 Cash paid for dividends, profits appropriation or payments of interest 41,772,038.58 30,640,401.33 Including: Dividens and profits paid to non-controlling interest Cash paid relating to other financing activities 70,690,408.48 29,129,116.86 Sub-total of cash outflows from financing activities 454,362,447.06 301,774,629.30 Net cash flows from financing activities -3,042,877.36 570,066,417.97 4. Effect of changes in foreign exchange rate on cash and cash equivalents -369,552.71 1,472,833.72 5. Net increase in cash and cash equivalents -251,221,467.19 482,692,465.30 Add: Cash and cash equivalents at beginning of year 921,661,803.17 438,969,337.87 6. Cash and cash equivalents at end of year 670,440,335.98 921,661,803.17 legal representative:Ji Zhijian head of the accounting work:Wang Jinxiuthe person in charge of the accounting office:Li Sheng 55 Cash Flow Statement of Parent Company Name of Enterprise: Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd Amount Unit :RMB Item Current year Last year 1.Cash flow from operating activities Cash receipts from sale of goods or rendering of services 1,051,980,732.24 769,156,429.00 Refunds of taxes 7,968,777.52 Other cash receipts in operating activities 41,293,162.40 16,186,561.44 Sub-total of cash inflows from operating activities 1,093,273,894.64 793,311,767.96 Cash payments for goods and services acquired 838,210,003.11 721,626,515.16 Cash payments to and on behalf of employees 117,935,562.40 116,047,528.96 Tax and duties payments 47,714,652.88 30,826,994.20 Other cash payments for operating activities 61,625,120.00 73,762,376.92 Sub-total of cash outflows from operating activities 1,065,485,338.39 942,263,415.24 Net cash flows from operating activities 27,788,556.25 -148,951,647.28 2.Cash flows from investing activities Cash receipts from return of investments 330,679,301.68 Cash receipts from investments income 71,227,317.94 262,646,360.17 Net cash receipts from disposal of fixed assets, intangible assets and other long-term assets 33,000.00 5,000.00 Net cash receipts from disposal of subsidiaries and other businesses Other cash receipts in investing activities Sub-total of cash inflows from investing activities 71,260,317.94 593,330,661.85 Cash payments for acquired fixed assets, intangible assets and other long-term assets 15,937,868.92 14,815,415.96 Cash payments for investment 253,285,500.00 1,010,883,060.00 Net cash payments for acquisition of subsidiaries and other businesses Other cash payments in investing activities Sub-total of cash outflows from investing activities 269,223,368.92 1,025,698,475.96 Net cash flows from investment activities -197,963,050.98 -432,367,814.11 3.Cash flows from financing activities Cash received from capital injection Cash receipts from borrowings 336,000,000.00 829,000,000.00 Other cash receipts in financing activities 5,971,249.02 Sub-total of cash inflows from financing activities 336,000,000.00 834,971,249.02 Cash paid for settlement of borrowings 296,900,000.00 237,000,000.00 Cash paid for dividends, profits appropriation or payments of interest 35,400,176.36 23,036,986.09 56 Other cash payments in financing activities 21,382,927.78 2,535,000.00 Sub-total of cash outflows from financing activities 353,683,104.14 262,571,986.09 Net cash flows from financing activities -17,683,104.14 572,399,262.93 4.Effect of changes in foreign exchange rate on cash and cash equivalents -61,918.58 19,977.77 5.Net increases in cash and cash equivalents -187,919,517.45 -8,900,220.69 Add: the beginning balance of cash and cash equivalent 361,032,768.50 369,932,989.19 6.The ending balance of cash and cash equivalent 173,113,251.05 361,032,768.50 legal representative:Ji Zhijian head of the accounting work:Wang Jinxiuthe person in charge of the accounting office:Li Sheng 57 Consolidated Statement of Changes in Shareholer's Equity Current year Equity attributable to the equity holders of the Company Item Paid-up capital Other equity instrument Other △General Less: Treasury Special Undistributed Minority interests Total equity (share capital) Capital reserves comprehensive Surplus reserves risk Others Sub-total shares reserves profits preference perpetual income provision others share bond 1. Balance at end of last year 843,212,507.00 717,097,098.38 2,208,669.73 825,226,634.15 618,445,922.58 3,006,190,831.84 54,077,970.99 3,060,268,802.83 Add: Changes in accounting policies -4,594.76 -65,810.05 -70,404.81 -7,761.79 -78,166.60 Correction of prior periods errors Business combination within the same control Others 2. Balance at beginning of current year 843,212,507.00 717,097,098.38 2,208,669.73 825,222,039.39 618,380,112.53 3,006,120,427.03 54,070,209.20 3,060,190,636.23 3. Increase/ Decrease for current year (Decrease listed 449,374.96 41,937,399.95 -993,624.19 41,393,150.72 2,458,638.92 43,851,789.64 with "-") (Ⅰ)Total of comprehensive income 49,375,900.83 49,375,900.83 4,798,638.92 54,174,539.75 (Ⅱ)Capital contribution and reduction 1.Ordinary share 2.Capital contributed by other equity instrument holders 3.Share-based payments charged to equity 4.Others (III)Profit appropriations 41,937,399.95 -50,369,525.02 -8,432,125.07 -2,340,000.00 -10,772,125.07 1.Appropriation to surplus reserves 41,937,399.95 -41,937,399.95 2.Appropriation to general risks provision 3.Appropriation to equity holders (or shareholders) -8,432,125.07 -8,432,125.07 -2,340,000.00 -10,772,125.07 4.Others (IV)Transfer within equity 1.Transfer of capital reserve to capital (share capital) 2.Transfer of surplus reserves to capital (share capital) 3.Surplus reserves making up of losses 4.Carried over the change in net asset/liability from remeasurment on defined benefit plan 5.Transfer of other comprehensive to retained earnings 6.Others (V)Special reserves 449,374.96 449,374.96 449,374.96 1.Provision for special reserve 13,214,150.71 13,214,150.71 13,214,150.71 2.Utilisation of special reserve 12,764,775.75 12,764,775.75 12,764,775.75 (VI)Others 4、Balance at end of current year 843,212,507.00 717,097,098.38 2,208,669.73 449,374.96 867,159,439.34 617,386,488.34 3,047,513,577.75 56,528,848.12 3,104,042,425.87 legal representative:Ji Zhijian head of the accounting work:Wang Jinxiu the person in charge of the accounting office:Li Sheng 58 Consolidated Statement of Changes in Shareholer's Equity(continued) Name of Enterprise:Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd Amount Unit:RMB Last year Equity attributable to the equity holders of the Company Item Other equity instrument Paid-up capital Other △General Minority interests Total equity Less: Treasury Special Undistributed (share capital) Capital reserves comprehensive Surplus reserves risk Others Sub-total shares reserves profits preference perpetual income provision others share bond 1. Balance at end of last year 843,212,507.00 720,215,866.78 2,178,681.73 809,471,199.64 627,764,582.32 3,002,842,837.47 46,654,771.50 3,049,497,608.97 Add: Changes in accounting policies -7,116.47 -539,927.37 -547,043.84 -8,916.10 -555,959.94 Correction of prior periods errors Business combination within the same control Others 2. Balance at beginning of current year 843,212,507.00 720,215,866.78 2,178,681.73 809,464,083.17 627,224,654.95 3,002,295,793.63 46,645,855.40 3,048,941,649.03 3. Increase/ Decrease for current year (Decrease listed -3,118,768.40 29,988.00 15,757,956.22 -8,844,542.42 3,824,633.40 7,424,353.80 11,248,987.20 with "-") (Ⅰ)Total of comprehensive income 29,988.00 18,731,969.48 18,761,957.48 1,634,788.18 20,396,745.66 (Ⅱ)Capital contribution and reduction -3,118,768.40 -3,386,430.61 -6,505,199.01 7,589,565.62 1,084,366.61 1.Ordinary share 2.Capital contributed by other equity instrument holders 3.Share-based payments charged to equity 4.Others -3,118,768.40 -3,386,430.61 -6,505,199.01 7,589,565.62 1,084,366.61 (III)Profit appropriations 15,757,956.22 -24,190,081.29 -8,432,125.07 -1,800,000.00 -10,232,125.07 1.Appropriation to surplus reserves 15,757,956.22 -15,757,956.22 2.Appropriation to general risks provision 3.Appropriation to equity holders (or shareholders) -8,432,125.07 -8,432,125.07 -1,800,000.00 -10,232,125.07 4.Others (IV)Transfer within equity 1.Transfer of capital reserve to capital (share capital) 2.Transfer of surplus reserves to capital (share capital) 3.Surplus reserves making up of losses 4.Carried over the change in net asset/liability from remeasurment on defined benefit plan 5.Transfer of other comprehensive to retained earnings 6.Others (V)Special reserves 1.Provision for special reserve 4,613,180.31 4,613,180.31 4,613,180.31 2.Utilisation of special reserve 4,613,180.31 4,613,180.31 4,613,180.31 (VI)Others 4、Balance at end of current year 843,212,507.00 717,097,098.38 2,208,669.73 825,222,039.39 618,380,112.53 3,006,120,427.03 54,070,209.20 3,060,190,636.23 legal representative:Ji Zhijian head of the accounting work:Wang Jinxiuthe person in charge of the accounting office:Li Sheng 59 Statement of Changes in Shareholer's Equity of Parent Company Name of Enterprise:Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd For the Year of 2023 Amount Unit:RMB Current year Item Paid-up capital Other equity instrument Other Less: Treasury Special (share capital) Capital reserves comprehensive Surplus reserves Undistributed profits Others Total equity shares reserves preference perpetual income others share bond 1. Balance at end of last year 843,212,507.00 755,146,592.54 1,246,569.06 825,226,634.15 936,931,213.43 3,361,763,516.18 Add: Changes in accounting policies -4,594.76 -41,352.87 -45,947.63 Correction of prior periods errors Others 2. Balance at beginning of current year 843,212,507.00 755,146,592.54 1,246,569.06 825,222,039.39 936,889,860.56 3,361,717,568.55 3. Increase/ Decrease for current year (Decrease listed 41,937,399.95 53,895,784.37 95,833,184.32 with "-") (Ⅰ)Total of comprehensive income 104,265,309.39 104,265,309.39 (Ⅱ)Capital contribution and reduction 1.Ordinary share 2.Capital contributed by other equity instrument holders 3.Share-based payments charged to equity 4.Others (III)Profit appropriations 41,937,399.95 -50,369,525.02 -8,432,125.07 1.Appropriation to surplus reserves 41,937,399.95 -41,937,399.95 - 2.Appropriation to equity holders (or shareholders) -8,432,125.07 -8,432,125.07 3.Others (IV)Transfer within equity 1.Transfer of capital reserve to capital (share capital) 2.Transfer of surplus reserves to capital (share capital) 3.Surplus reserves making up of losses 4.Carried over the change in net asset/liability from remeasurment on defined benefit plan 5.Transfer of other comprehensive to retained earnings 6.Others (V)Special reserves 1.Provision for special reserve 2.Utilisation of special reserve (VI)Others 4、Balance at end of current year 843,212,507.00 755,146,592.54 1,246,569.06 867,159,439.34 990,785,644.93 3,457,550,752.87 legal representative:Ji Zhijian head of the accounting work:Wang Jinxiu the person in charge of the accounting office:Li Shen 60 Statement of Changes in Shareholer's Equity of Parent Company(continued) For the Year of 2023 Last year Item Paid-up capital Other equity instrument Other Less: Treasury Special (share capital) Capital reserves comprehensive Surplus reserves Undistributed profits Others Total equity shares reserves preference perpetual income others share bond 1. Balance at end of last year 843,212,507.00 755,146,592.54 1,216,581.06 809,471,199.64 803,564,427.95 3,212,611,308.19 Add: Changes in accounting policies -7,116.47 -64,048.26 -71,164.73 Correction of prior periods errors Others 2. Balance at beginning of current year 843,212,507.00 755,146,592.54 1,216,581.06 809,464,083.17 803,500,379.69 3,212,540,143.46 3. Increase/ Decrease for current year (Decrease listed 29,988.00 15,757,956.22 133,389,480.87 149,177,425.09 with "-") (Ⅰ)Total of comprehensive income 29,988.00 157,579,562.16 157,609,550.16 (Ⅱ)Capital contribution and reduction 1.Ordinary share 2.Capital contributed by other equity instrument holders 3.Share-based payments charged to equity 4.Others (III)Profit appropriations 15,757,956.22 -24,190,081.29 -8,432,125.07 1.Appropriation to surplus reserves 15,757,956.22 -15,757,956.22 2.Appropriation to equity holders (or shareholders) -8,432,125.07 -8,432,125.07 3.Others (IV)Transfer within equity 1.Transfer of capital reserve to capital (share capital) 2.Transfer of surplus reserves to capital (share capital) 3.Surplus reserves making up of losses 4.Carried over the change in net asset/liability from remeasurment on defined benefit plan 5.Transfer of other comprehensive to retained earnings 6.Others (V)Special reserves 1.Provision for special reserve 2,791,153.21 2,791,153.21 2.Utilisation of special reserve 2,791,153.21 2,791,153.21 (VI)Others 4、Balance at end of current year 843,212,507.00 755,146,592.54 1,246,569.06 825,222,039.39 936,889,860.56 3,361,717,568.55 legal representative:Ji Zhijian head of the accounting work:Wang Jinxiu the person in charge of the accounting office:Li Sheng 61 I. General Information Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd (the “Company”) previously named as Dalian Refrigeration Company Limited, was reorganized and reformed from main part of former Dalian Refrigeration Factory. On December 8, 1993, the Company went to the public as a listed company at Shenzhen Stock Exchange Market. On March 20, 1998, the Company successfully went to the public at B share market and listed at Shenzhen Stock Exchange Market with total share capital of RMB350,014,975.00Yuan. The registered address is No. 106 East Liaohe Road, Dalian Economic and Technological Development Zone, Liaoning Province, as same as the headquarters’ address. The unified social credit code is 912102002423613009 on the business license. According to the 13th meeting of the 6th generation of board, extraordinary general meeting for 2015 fiscal year and ' Restricted share incentive plan (draft)', the Company planned to introduce an ordinary share to incentive objectives, which was 10,150,000 number of shares would be granted to 41 share incentive objectives at granted price of RMB5.56Yuan per share. Up to March 12, 2015, the Company received new added share capital of RMB10,150,000.00Yuan. The general meeting for 2015 fiscal year held on April 21, 2016 approved the profit distribution policy for the year of 2015, which agrees the profit distribution based on the total 360,164,975 number of shares as share capital, paid share dividend of 5 common shares for every 10 shares through capital reserve. The policy stated above was fully implemented on May 5, 2016, and the registered capital was altered to 540,247,462.00Yuan. The 17thmeeting of the 6th generation of board was held on June 4, 2015 and the 2nd interim shareholders’ meeting was held on June 24, 2015, meeting deliberated and passed the proposal of non-public offering of ‘A shares’. China’s Securities Regulatory Commission issued SFC license [2015]3137 on December 30, 2015, approving that new non-public offering cannot exceeded 38,821,954 numbers of shares. The company implemented the post meeting procedures for China’s Securities Regulatory Commission, which is regarding adjustment of bottom price and the number of the shares issued after the implementation of profit distribution policy of 2015 in May, 2016, and accordingly revised the upper limit of non-public offering of share to58,645,096 number of new ‘A shares’. The company issued the non-public offering of 58,645,096 number of ‘A shares’ to 7 investors, and as a result, the total number of shares of the Company is changed to 598,892,558 shares, and the par value is 1yuan per share and the total share capital is 598,892,558.00Yuan. According to the ‘Restricted Share Incentive Plan(draft) of Dalian Refrigeration Company Limited for the year of 2016’ and the ‘Proposal regarding the shareholders’ meeting authorized the board of directors to implement the Restricted Share Incentive Plan’ approved 62 on the 3rd provisional general meeting held on September 13, 2016, the 9th meeting of the 7th generation of board deliberated and passed the ‘Proposal about granting the restricted shares to incentive targets’ on September 20, 2016 and set September 20 , 2016 as share granted date, and granted 12,884,000 number of restricted shares to 118 incentive targets at granted price of 5.62Yuan per share. By November 22, 2016, The Company has actually received the newly subscribed registered share capital of 12,884,000.00Yuan subscribed by incentive targets. On May 19, 2017, the general meeting for 2016 fiscal year was held and profit appropriation scheme for 2016 FY was approved, which was every 10 shares will be increased by 4 shares through capital reserve based on the total 611,776,558 number of shares. After the profit appropriation scheme, the registered capital was changed to RMB856,487,181.00Yuan. On December 28, 2017, The Company held the 3rd extraordinary shareholders meeting in 2017, and reviewed and approved the “Proposal on Repurchasing and Retiring Partially Restricted Stocks of the 2016 Restricted Stock Incentive Plan”. On March 8, 2018, after The Company's repurchase and cancellation, The Company implemented the corresponding capital reduction procedures according to law. The registered capital of The Company was changed from 856,487,181.00Yuan to 855,908,981.00 Yuan. On May 4, 2018, The Company held the 21st meeting of the 7th Board of Directors, and reviewed and approved the “Proposal on Repurchasing and Retiring Partially Restricted Stocks of the 2015 Restricted Stock Incentive Plan". On June 29, 2018, after The Company's repurchase and cancellation, The Company implemented the corresponding capital reduction procedures according to law. The registered capital of The Company was changed from 855,908,981.00 Yuan to 855,434,087 .00Yuan. On January 17th, 2019, the 1st interim shareholders’ meeting was held and approved for “Proposal on Termination of the 2016 Restricted Stock Incentive Plan and Repurchasing and Retiring Restricted Stocks Plan”. Up to February 25th, 2019, The Company has completed the repurchasing and retiring stocks plan, respectively The Company shall perform the corresponding capital reduction procedures in accordance with the law and the registered capital decreased from 855,434,087.00Yuan to 843,212,507.00Yuan. On December 20th, 2019, The Company held the 7th meeting of the 8th Board of Directors and approved to change The Company’s name from Dalian Refrigeration Company Limited to Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd. The company is in general equipment manufacturing industry. The main business activities are the research and development, production and sales of various industrial refrigeration components, as well as the design, production and installation of complete engineering projects. The main products include: scroll type, piston type, screw type compressor units, cold water machine and other refrigeration equipment and all kinds of complete sets of 63 refrigeration projects. This financial report is approved by the board of directors on April 24,2024. The financial statements will be reviewed at general meeting. II. Financial Statements Preparation Basis (1) Preparing basis The group’s financial statements are prepared according to the actual occurred transactions and events, and in accordance with ‘Accounting Standards for Business Enterprises’, its application guidelines, interpretations and other relevant provisions promulgated by the Ministry of Finance (collectively referred to as "Accounting Standards for Business Enterprises") and " No. 15 of Information Disclosure and Reporting Rules for Publicly Listed Companies - General Provisions for Financial Reports" (revised in 2023) promulgated by the China Securities Regulatory Commission (hereinafter referred to as the "CSRC"). (2) Going concern The group has assessed the capacity to continually operate within 12 months since December 31, 2023, and hasn’t found the major issues impacting on the sustainable operation ability. The Company’s financial statements are prepared on the basis of going concern assumption. III. Significant Accounting Policies and Accounting Estimates 1. Declaration for compliance with accounting standards for business enterprises The financial statements are prepared in line with the requirements of Accounting Standard for Business Enterprise, and reflect the relative information of the financial position for the year ended as of December 31, 2023, operating performance, cash flow of the Company and the group for the year then ended truly and fully. 2. Accounting period The group adopts the Gregorian calendar year as accounting period from Jan 1 to Dec 31. 3. Operating cycle The group sets twelve months for one operating cycle. 4. Functional currency The group adopts RMB as functional currency. 5. Materiality criteria set up method and basis The financial statements preparation and disclosure are in line with materiality. For those matters to be disclosed and need judgement for materiality, materiality criteria set up method and basis are as follows: 64 In the notes to Disclosures involved by the financial Materiality criteria set up method and materiality judgement statements basis Significant receivables with Single provision is over 10 million Yuan and individual provision for bad Note VI.3 represents more than 10% of the total debts provision Single provision is over 10 million Yuan and Collection or reverse of Note VI.3 represents more than 10% of the total significant receivables provision Single provision is over 10 million Yuan and Significant receivables written Note VI.3 represents more than 10% of the total off provision Significant construction in Note XVI.16 Single project budget over 30 million Yuan progress The book value of long-term equity investment in a single investee accounts for more than 10% of the group's net assets and the amount is greater than 100 million Yuan, Significant JV or associates Note VIII.3 or the gain or loss on investment under the long-term equity investment equity method accounts for more than 10% of the group's consolidated net profit Subsidiary’s net assets are more than10% of Significant subsidiary the group asses and its net profit is more than 10% of consolidated profit 6. Accounting for business combination under same control and not under same control (1) Business combination under the same control Business combination under the same control is the situation where entities participating the merger are controlled by the same party or controlled by parties under same ultimate control before and after merger and the control is not temporary. The group, as an acquirer, the assets and liabilities that the group obtained in a business combination under the same control should be measured on the basis of their carrying amount of the acqiree in the ultimate control party’s consolidated financial statements on the combining date. As for the balance between the carrying amount of the net assets obtained by the combining party and the carrying amount of the consideration paid by it, the capital 65 surplus shall be adjusted. If the capital surplus is not sufficient to be offset, the retained earnings shall be adjusted. (2) Business combination not under same control Business combination not under the same control is the situation where entities participating the merger are not controlled by the same party or not controlled by parties under same ultimate control before and after merger. When the group is an acquirer, for a business combination not under same control, the asset, liability and contingent liability obtained, shall be measured at the fair value on the acquisition date. The difference, when combination cost exceeds proportionate share of the fair value of identifiable net assets of acquire should be recognized as goodwill. If the combination cost is less than proportionate share of the fair value of identifiable net assets of acquiree, firstly, fair value of identifiable asset, liability or contingent liability shall be reviewed, and so the fair value of non-monetary assets or equity instruments issued in the combination consideration , after review, still the combination cost is less than proportionate share of the fair value of identifiable net assets of acquire, the difference should be recognized as non-operating income. If a business consolidation not under common control is finally achieved in stages, when preparing the consolidated financial statements, the acquirer shall remeasure its previously held equity interest in the acquiree at its fair value on acquisition date and recognize the gain or loss as investment income for the current period. Other comprehensive income, under equity method accounting rising from the interest held in acquiree in relation to the period before the acquisition, and changes in the value of its other equity other than net profit or loss, other comprehensive income and profit appropriation shall be transferred to investment gain or loss for the period in which the acquisition incurs, excluding the other comprehensive income from the movement on the remeasurement of ne asset or liability of defined benefit plan. 7. Criteria of control judgment and method of preparation of consolidated financial statements Consolidation scope is determined on the control basis including the Company and all subsidiaries controlled by the Company. Control criteria is that the group has the power over the investees, enjoy the variable return by involving the relative activities of the investees and also has the impact on the return amount through the power over the investees. If subsidiaries adopt different accounting policy or have different accounting period from the parent company, appropriated adjustments shall be made in accordance with the Company policy in preparation of the consolidated financial statements. All significant intergroup transactions, outstanding balances and unrealized profit shall be 66 eliminated in full when preparing the consolidated financial statements. Portion of the subsidiary’s equity not belonging to the parent, profit, loss for the current period, portion of other comprehensive income and total comprehensive belonging to minority interest, shall be presented separately in the consolidated financial statements under “minority interest of equity”, minority interest of profit and loss”, “other comprehensive income attributed to minority interest” and “total comprehensive income attributed to minority interest” title. If a subsidiary is acquired under common control, its operation results and cash flow shall be consolidated since the beginning of the consolidation period. When preparing the comparative consolidated financial statements, adjustments shall be made to relevant items of comparative figures as regarded that reporting entity established through consolidation has been always existing since the point when the ultimate controlling party starts to have the control. If a subsidiary is acquired not under common control, its operation results and cash flow shall be consolidated since the beginning of the consolidation period. In preparation of the consolidated financial statements, adjustments shall be made to subsidiary’s financial statements based on the fair value of its all identifiable assets, liability or contingent liability on the acquisition date. When the group partially disposes of the long –term equity investment in subsidiary without losing the control over it, in the consolidated financial statements, the difference, between disposals price and respective disposed value of share of net assets in the subsidiary since the acquisition date or combination date, shall be adjusted for capital surplus or share premium, no enough capital surplus, then adjusted for retained earnings. When the group partially disposes of the long –term equity investment in subsidiary and lose the control over it, in preparation of consolidated financial statements, remaining share of interest in the subsidiary shall be remeasured on the date of losing control. Sum of the share disposal consideration and fair value of remaining portion of shareholding minus the share of the net assets in the subsidiary held based on the previous shareholding percentage since the acquisition date or combination date, the balance of above is recognized as investment gain/loss for the period and goodwill shall be written off accordingly. Other comprehensive income relevant to share investment in subsidiary shall be transferred to investment gain /loss for the period on the date of losing control. When the group partially disposes of the long –term equity investment in subsidiary and lose the control over it by stages, if all disposing transactions are bundled, each individual transaction shall be seen as a transaction of disposal of a subsidiary by losing control. The difference between the disposal price and the share of the net assets in the subsidiary held before the date of losing control, shall be recognize as other comprehensive income until the date of losing control where it is transferred into investment gain/ loss for the current period. If the equity investment in the subsidiary is disposed of by stages through multiple 67 transactions until the control is lost, and it is not a bundled transaction, each transaction shall be accounted for separately according to whether the control is lost. 8. Cash and cash equivalent The cash listed on the cash flow statements of the Company refers to cash on hand and bank deposit. The cash equivalents refer to short-term (normally with original maturities of three months or less) and liquid investments which are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value. 9. Translation of foreign currency (1) Foreign currency transaction Foreign currency transactions are translated at the spot exchange rate issued by People’s Bank of China (“PBOC”) on the 1st day of the month when the transactions are accounted initially. At the balance sheet date, foreign currency monetary items should be converted into reporting currency at the balance sheet date’s spot exchange rate. Exchange differences should be taken into the current profits and losses except special foreign currency borrowings for construction and producing assets which are qualifying for assets capitalization, should be capitalized. Foreign currency non-monetary items, which are recorded in historical cost, should be still recorded at the spot exchange rate when the transaction occurred and no change on reporting currency amount. Foreign currency non-monetary items, which are measured at fair value, should be recorded in the spot exchange rate at the date measuring the fair value and the differences should be recognized as profit and loss from fair value changes and included in the current profits and losses. Invested capital in foreign currency shall be converted into reporting currency at FX rate at when the investment is received, and no foreign exchange difference arises between capital received and monetary items. 10. Financial instruments (1) Recognition and derecognition of financial instruments The group shall recognize a financial asset or a financial liability when becoming party to the contractual provisions of the instrument. An entity shall derecognize a financial asset(or a part of it or a group of similar financial asset) when, and only when: 1) the contractual rights to the cash flows from the financial asset expire, or 2) the entity transfers contractual rights to receive the cash flows of a financial asset, or assumes a contractual obligation to pay those cash flows received to the 3rd party in full amount in time according to the ‘passing-through’ agreement and the entity substantially transfers all the risks and rewards of ownership of the financial asset in nature, or the entity neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, but the entity has not retained control. 68 Financial liabilities shall be derecognized if the obligation of the liability is fulfilled, cancelled or expired. An exchange between an existing borrower and lender of debt instruments with substantially different terms shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms an existing financial liability shall be accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. The difference between the carrying amount of a financial liability extinguished and the consideration paid, including any non-cash assets transferred or liabilities assumed, shall be recognized in profit or loss. A regular way purchase or sale of financial assets shall be recognized and derecognized, as applicable, using trade date accounting or settlement date accounting. (2) Classification and measurement of financial assets At initial recognition, the group shall classify financial assets as measured at amortized cost, fair value through other comprehensive income or fair value through profit or loss on the basis of both the group’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset. Only when the business model for managing the financial assets is changed, the affected financial assets shall be reclassified. In determining the business model, the group considers, among others, the way in which the company evaluates and reports the performance of financial assets to key management personnel, the risks affecting the performance of financial assets and the way in which they are managed, and the way in which the relevant business managers are remunerated. In assessing whether the objective is to collect contract cash flows, the group needs to make an analytical judgment on the reasons, timing, frequency and value of the sale of the financial assets before the maturity date. In determining the contract cash flow characteristics, the group is required to determine whether the contract cash flow is only the payment of principal and interest based on the outstanding principal, (including the assessment of the time value of money correction, judging any significant difference between it and the baseline cash flow/ for financial assets containing early repayment characteristics, is required to determine whether the fair value of early repayment features is very small). Financial assets are measured at fair value at the initial recognition, but accounts receivable or notes receivable arising from the sale of goods or provision of services, etc., do not contain a significant financing component or do not consider the financing component of less than one year, the initial measurement is based on the transaction price. For financial assets that are measured at fair value, the related transaction costs are directly included in current profit or loss, and those costs of other categories of financial assets are 69 included in their initial recognized amounts. Financial assets subsequent measurement based on the classification 1) A financial asset measured at amortized cost A financial asset shall be measured at amortized cost if both of the following conditions are met: ①the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows;②the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The financial assets of this category include: monetary fund, receivable, notes receivable and other receivables. 2) Debt instruments measured at fair value through other comprehensive income A financial asset shall be measured at fair value through other comprehensive income if both of the following conditions are met: ①the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and ②the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The effective interest rate is applied to interest income. A gain or loss arising from a financial asset measured at fair value through other comprehensive income, which is not part of hedging relationship shall be recognized in other comprehensive income apart from interest income, impairment loss and foreign exchange difference. When this type of financial assets is derecognized, accumulated gain or loss previously in the other comprehensive income shall be out of it and accounted into retained earnings when the financial asset is derecognized. The financial assets of this category include: receivable financing. 3) Equity instruments measured at fair value through other comprehensive income The group may make an irrevocable election for particular investments in equity instruments that it would be measured at fair value through other comprehensive income, but once the election is made, it is irrevocable. The group only recognizes the dividend (apart from the dividend as investment cost pay back) into profit and loss and fair value movement subsequently will be recognized into comprehensive income and no need for impairment provision. When this type of financial assets is derecognized, accumulated gain or loss previously in the other comprehensive income shall be out of it and accounted into retained earnings when the financial asset is derecognized. The financial asset of this category is equity instruments. 4) A financial asset measured as fair value through profit or loss Apart from classified as the amortized cost financial assets and as fair value through other comprehensive income financial assets, a financial asset is classified as fair value through profit or loss. The group shall subsequently measure this financial asset at its fair value, 70 except for hedging accounting, any gain or loss on FVTPL shall be accounted into profit and loss. The financial assets of this category include: tradable financial asset other non-current financial asset. A financial asset shall be classified as fair value through profit or loss if it is recognized contingent consideration through business combination, which is not under same control situation. (3) Classification, basis for recognition and measurement of financial liability Except for the financial guarantee contract, commitments to provide a loan at a belowmarket interest rate and financial liabilities that arise when a transfer of a financial asset does not qualify for derecognition or when the continuing involvement approach applies, the group shall initially classify all financial liabilities as it measured at amortized cost or financial liabilities at fair value through profit or loss. For financial liabilities that are measured at fair value, the related transaction costs are directly included in current profit or loss, and those costs of other categories of financial assets are included in their initial recognized amounts. Financial liabilities subsequent measurement based on the classification 1) Financial liabilities as it subsequently measured at amortized cost Effective interest method is applied to financial liabilities as subsequently measured at amortized cost 2) Financial liability as it measured at fair value through profit or loss Financial liability measured at fair value through profit or loss including tradable financial liability (derivative instrument of financial liability included) and designated as financial liability measured at fair value through profit or loss. Tradeable financial liability (including derivate instrument of financial liability) are subsequently measured at fair value. The net gain or loss arising from changes in fair value are recorded in profit or loss for the period in which they are incurred. Financial liability designated as it measured at fair value through profit or loss shall be subsequently measured at fair value, except for changes in fair value caused by changes in the group's own credit risk, which are recognized in other comprehensive income, other changes in fair value are recognized in profit or loss for the current period; The group recognizes all fair value changes (including the amount affected by changes in its own credit risk) in profit or loss if the inclusion of changes in fair value caused by changes in its own credit risk in other comprehensive income would cause or widen the accounting mismatch in profit or loss for the current period. (4) Financial instrument impairment Based on expected credit loss, the group shall apply the impairment requirements for the followings: ① a financial asset measured at amortized cost; ② debt investment measured 71 at fair value and changes in fair value is through other comprehensive income; ③ lease receivable; ④ a contractual asset and financial guarantee contract. Expected credit loss is the weighted average of credit losses with the respective risks of a default occurring as the weights. A credit loss herein is referred to as the present value, at original effective rate, of the difference between the contractual cash flows that are due to the group under the contract; and the cash flows that the Company expects to receive, that's the present value of the total cash shortage. The group shall measure expected credit losses of a financial instrument in a way that reflects: ①an unbiased and probabilityweighted amount that is determined by evaluating a range of possible outcomes; ② the time value of money; and ③reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. Expected credit loss of financial instrument is assessed individually and portfolio. The group assesses the expected credit loss based on the portfolio in accordance with the common characteristics of credit risk which involves type of financial instrument, credit risk grade, and age of trade receivables. When assessing expected credit losses, the group considers all reasonable and supportable information, including that which is forward-looking. In making these judgments and estimates, the group extrapolates the expected changes in the debtor's credit risk based on historical repayment data combined with factors such as economic policies, macroeconomic indicators and industry risks. Different estimates may affect the provision for impairment, and the provision already made may not equal the actual amount of impairment losses in the future. 1) Impairment testing method of receivable and contract asset For receivable, notes receivable and contract asset etc., which don’t contain significant financing component and arise from sales of products and service provision, the group adopts simplified method to account expected credit loss provision at an amount equal to the whole lifetime expected credit losses. For lease premium receivable, trade receivable containing significant financing component, and contract asset, the group adopts simplified method to account expected credit loss provision at an amount equal to the whole lifetime expected credit losses. The group determines the expected credit loss of trade receivable on the basis of portfolios with common characteristics of credit risk, which are considered by expected credit loss measurement reflection, by reference to historical experience of credit loss and by comparison of receivable past due days/ receivable age with default risk rate, unless the single credit loss is separately recognized for contractual payments that is significant in amount and 72 credit impaired. If certain client is significant different from others in terms of credit risk characteristics, or the client’s credit risk has significantly increased, such as experiencing severe finance difficulty, its expected credit loss is obviously higher than it to be at accounting age, the group will make separate credit loss provision for this client’s receivable. ① Portfolio category and recognition basis of receivable ( contract asset) The group classifies accounts receivable (and contract assets) according to the similarity and relevance of credit risk characteristics based on information such as age, nature of payments, credit risk exposure, historical debt collection, etc. For accounts receivable (and contract assets), the group determines that aging is the primary factor affecting its credit risk and therefore, the group assesses its expected credit losses on the basis of aging portfolios. The group calculates the overdue age based on the payment date agreed in the contract. No expected credit loss is recognized for receivables from related party within consolidated scope as the group assesses its credit risk is relatively low. ② Portfolio category and recognition basis of notes receivable Portfolio category Expected credit loss accounting estimate policy Lower credit risk assessed by the management, no Bank acceptance note portfolio expected credit loss recognition Commercial acceptance note Same as receivables portfolio and provided for excepted portfolio credit loss allowance based on expected credit loss rate 2) Impairment testing method of debt investment, other debt investment, loan commitments and financial guarantee contracts With the exception of financial assets (such as debt investments, other debt investments), loan commitments and financial guarantee contracts for which the simplified measurement method is adopted above, the group adopts the general method (three-stage method) for the provision of expected credit losses. At each balance sheet date, the group assesses whether its credit risk has increased significantly since the initial recognition, and if the credit risk has not increased significantly since the initial recognition, in the first stage, the group measures the loss provision at an amount equivalent to the expected credit loss over the next 12 months and calculates interest income based on the carrying balance and effective interest rate; If the credit risk has increased significantly since the initial recognition but no credit impairment has occurred, in the second stage, the group measures the loss provision at an amount equivalent to the expected credit loss over the entire duration and calculates interest income based on the carrying balance and effective interest rate; If credit impairment occurs after initial recognition, in the third stage, the group measures the loss provision at an amount equivalent to the expected credit loss over the entire duration and calculates interest income at amortized costs and effective interest rates. For financial instruments with only low credit risk 73 at the balance sheet date, the group assumes that their credit risk has not increased significantly since initial recognition The whole life expected credit loss refers to the expected credit loss caused by all possible default events during the whole expected life of the financial instrument. Expected credit losses over the next 12 months are expected credit losses resulting from defaults on financial instruments that may occur within 12 months after the balance sheet date (or if the expected duration of the financial instrument is less than 12 months) and are part of the overall expected credit losses over the life of the financial instrument. Criteria of significant increase in credit risk and definition of credit impaired assets are disclosed on Note X.1 (5) Recognition and measurement of transfer of financial assets A financial asset is derecognized when the financial asset has been transferred together with substantial all risks and rewards to the transferee. A financial asset can not be derecognized when the substantial all risks and rewards to the financial asset has been retained. When the all risks and rewards of the financial asset are neither transferred nor retained, but the group has given up its control of the financial asset, the financial asset shall be derecognized and recognize the asset and liability originated. Where control of the financial asset is not relinquished, the relevant financial asset shall be recognized according to the extent to which it continues to be involved in the transferred financial asset, and the relevant liability shall be recognized accordingly. In the case where the financial asset as a whole qualifies for the derecognition conditions, the difference between the carrying value of transferred financial asset at the derecognition date and the sum of the consideration received for transfer and the accumulated amount of changes in fair value in respect of the amount of partial derecognition ( financial assets involved in transfer must qualify the following conditions: ① the financial asset is held within a business model whose objective is not only for collecting contractual cash flows but also for sale; ②the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest based on the principal amount outstanding) , that was previously recorded under other comprehensive income is transferred into profit or loss for the period. In the case where only part of the financial asset qualifies for derecognition, the carrying amount of financial asset being transferred is allocated between the portions that to be derecognized and the portion that continued to be recognized according to their relative fair value. The difference between the amount of consideration received for the transfer and the accumulated amount of changes in fair value that was previously recorded in other comprehensive income for the asset partially qualified for derecognition (financial assets involved in transfer must qualify the following conditions:① the financial asset is held 74 within a business model whose objective is not only for collecting contractual cash flows but also for sale; ; ②the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest based on the principal amount outstanding ) and the above-mentioned allocated carrying amount is charged to profit or loss for the period. Where the assets continue to be involved by providing financial guarantees for the transferred financial assets, the assets that continue to be involved in the same form are recognized at the lower of the carrying value of the financial assets and the amount of the financial guarantees. Financial guarantee amount means the maximum amount of consideration received that will be required to be repaid. (6) Distinguish between financial liability and equity instrument and accounting Financial liability and equity instrument shall be distinguished in accordance with the following standards: ① if the group cannot unconditionally avoid paying cash or financial asset to fulfil a contractual obligation, the contractual obligation is qualified or financial liability. For certain financial instrument, although there are no clear terms and conditions to include obligation of paying cash or other financial liability, contractual obligation may indirectly be formed through other terms and conditions. ② the group’s own equity instrument shall also be considered whether it is the substitute of cash, financial asset or it is the remaining equity, after the issuer deducts liability, enjoyed by the equity holder , if it must or can be used to settle a financial asset. If the former, the instrument is a financial liability of the issuer, otherwise it is an equity instrument of the issuer. In certain circumstances, financial instrument contract is classified as financial liability, if financial instrument contract specifies the Company must or can use its own equity to settle the financial instrument, the contractual amount of right or obligation equals to that of the numbers of own equity instrument available or to be paid multiplied by fair value when settling, nevertheless the amount is fixed, or varied partially or fully based on the its own equity’s market price(such as interest rate, certain commodity’s or financial instrument’s price variance). When classifying a financial instrument (or its component) in the consolidated statements, the group takes all terms and conditions agreed by the its member and instrument holder into consideration. If the group because of the instrument, as a whole, bears settlement obligation by paying cash, other financial asset or other means resulted in financial liability, the instrument shall be classified as financial liability. (7) Derivative financial instrument The group uses derivative financial instruments such as foreign exchange forward contracts, commodity forward contracts and interest rate swaps to hedge exchange rate risk, commodity price risk and interest rate risk respectively. Derivative financial instruments are initially measured at their fair value on the date the derivative transaction contract is signed, and are 75 subsequently measured at their fair value. A derivative instrument with a positive fair value is recognized as an asset and a negative fair value is recognized as a liability. Except hedging accounting, all gain or loss from the FV movement of derivative instrument shall be recognized in the income statement. (8) Financial asset and financial liability offset Financial asset and financial liability shall be presented in the balance sheet separately and cannot be offset, unless the following conditions are all met: ①the Company has the legal right to recognized offset amount and the right is enforceable. ②the Company plans to receive or a legal obligation to pay cash at net amount. 11. Inventories Inventories are raw material, low-valuable consumable, goods on transit, working-in-progress, finished goods, and cost to fulfil the contract etc. The inventories are processed on perpetual inventory system, and are measured at their actual cost on acquisition. Weighted average cost method is taken for measuring the inventory dispatched or used. Low value consumables and packaging materials is recognized in the income statement by one-off method. At the balance sheet date, inventory is measured at the lower of cost and net realizable value. If the cost of the inventory is higher than its net realizable value, a provision is made for the decline in the price of the inventory and it is accounted in the current profit or loss. Net realizable value is the amount of the estimated selling price of inventory in daily activities less the estimated costs to be incurred at completion, estimated selling expenses and related taxes. Impairment provision for the group's raw materials/goods in stock/WIP/ cost to fulfil the contract is made on an individual inventory item, and when determining its net realizable value, the inventory of goods in stock and materials used for sale are determined at the estimated selling price of the inventory less estimated selling expenses and related taxes; Inventory of materials held for use in production is determined at the estimated selling price of the finished goods produced less the estimated costs to be incurred up to completion, estimated selling expenses and 12. Contract asset and contact liability (1) Contract asset Contract asset is an entity’s right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time. For example, the group sold two goods that can be clearly distinguished to the client, then the group has the right to consideration in exchange of the goods because one 76 of the goods are delivered, but the consideration’s collection is conditioned on the other goods delivery, in this case, the right to consideration shall be recognized as contract asset. Expected credit loss recognition of contract asset is referred to the Note III、10 Provision for impairment of financial assets. (2) Contract liability An entity’s obligation to transfer goods or services to a customer for which the entity has received consideration (or the amount is due) from the customer. If a customer pays consideration, or the group has a right to an amount of consideration that is unconditional before the group transfers a good or service to the customer, the group shall present the contract as a contract liability when the payment is made or the payment is due (whichever is earlier). 13. Assets relevant to contract cost (1) Assets recognition methods in relation to contract cost Assets relevant to contract cost in the group include cost to fulfill the contract and cost to obtain a contract. Cost to fulfill the contract is presented under inventory and other non-current assets. Cost to obtain a contract is presented under other current assets and other non-current assets. If the costs incurred in fulfilling a contract with a customer are not within the scope of another Standard such as inventory , fixed assets or intangible assets , an entity shall recognize an asset from the costs incurred to fulfill a contract only if those costs meet all of the following criteria: the costs relate directly to a contract or to an anticipated contract, including direct labor, direct materials and overheads which is clearly stated to be borne by the client and any other cost in line with the contract; the costs enhance resources of the group that will be used in performance obligations in the future; and the costs are expected to be recovered. An asset as the incremental costs of obtaining a contract with a customer shall be recognized if the group expects to recover those costs. The group may recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset t is one year or less. The incremental costs of obtaining a contract are those costs that the group incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, a sales commission). Other expenses incurred in order to obtain a contract rather than the incremental cost, and expected to be recovered (regardless of whether the contract is obtained such as travelling expenses) shall be recognized as an expense when incurred, unless those costs are explicitly chargeable to the customer. (2) Amortization of asset relevant to contract cost 77 An asset recognized in accordance with contract cost shall be amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates. (3) Impairment of asset relevant to contract cost If the carrying value of the group's assets related to the contract cost is higher than the following two differences, the group will make the impairment provision for the excessive part and recognize the asset impairment loss: ① The remaining consideration that the group is expected to obtain due to the transfer of the commodities related to the asset; ② Estimate the costs to be incurred for the transfer of the relevant goods 14. Long-term equity investment Long term equity investments are the equity investment in subsidiary, in associated company and in joint venture. (1) Judgement on control, joint control and significant influence Equity investments in which the group has a significant impact on the investee are investments in associates. Significant influence refers to having the power to participate in the decision-making of the financial and operational policies of the investee, but not being able to control or jointly control the formulation of these policies with other parties. Significant influence exists when the entity directly or indirectly owned 20% or more but less than 50% voting shares in the investee, unless there is explicit evidence that the company cannot participate in the production and operation decisions of the investee or have control over the investee. When having less than 20% voting shares, the group’s significant influence still exists if the followings are taken into accounts: representation on the board of directors or equivalent governing body of the investee, participation in financial or operating activities policy-making processes, material transactions between the investor and the investee, interchange of managerial personnel or provision of essential technical information etc. The group’s joint venture investment is an equity investment whereby the parties have jointly control over it and have rights to the net assets of the investee. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The group’s judgement on joint control is based on the joint arrangement that all participants or combinations of participants collectively control the arrangement and that decisions relating to the activities of the arrangement must be made with the unanimous consent of those participants who collectively control the arrangement. (2) Accounting 78 The group initially measures the long-term investment in line with the initial cost for acquiring the investment. The initial investment cost for long-term equity investment acquired through business combination under common control, is the carrying amount presented in the consolidated financial statements of the share of net assets at the combination date in the acquired company. If the carrying amount of net assets at the combination date in the acquired company is negative, investment shall be recognized at zero. If long-term equity investment is acquired through business combination not under common control, initial investment cost shall be the combination cost. If the equity investment of investee not under common control is acquired by stages and it’s not a bundled transaction, the carrying amount of the equity investment held previously plus newly increased investment cost are taken as the initial investment cost. Apart from the long-term equity investments acquired through business combination, the cost of investment for the long-term equity investments acquired by cash payment is the amount of cash paid, relevant direct expense, tax and other necessary expenses for the investment. For long-term equity investment acquired by issuing equity instruments, the cost of investment is the fair value of the equity instrument issued. The Company adopts cost model for investment in subsidiary on separate financial statement. Under cost model, the long-term equity investment is measured at initial investment cost. When more investment is added, it shall increase the carrying amount of investment by adjusting the fair value of additional investment and relevant transaction expenses. Cash dividend or profit declared by investee shall be recognized as investment gain/loss for the period based on the proportion share in the investee. The Company adopts equity method for investment in joint venture and affiliate. Under equity method, if the initial investment cost is greater than the share of fair value of the identifiable net assets in the investee, the initial investment cost of long-term equity investment is no need to be adjusted; If the initial investment cost is less than the share of fair value of the identifiable net assets in the investee , the difference shall be recorded into the current profit and loss, and the cost of long-term equity investment shall be adjusted at the same time. Long-term equity investment subsequently, under equity method, shall be adjusted for it carrying amount according to the share of equity increase or decrease in the investee. The Company shall recognize its share of the investee’s net gain or losses after the investee’s net profit adjustment, based on the fair value of the investee’s individual identifiable assets at the acquisition date, after making appropriate adjustments thereto in conformity with the accounting policies and accounting period, and offsetting the unrealized profit or loss from the inter-group transactions, not constituting the business, between the entity and its 79 associates and joint ventures according to the shareholding attributable to the group (full amount of loss shall be recognized if the inter-group transaction is impairment loss). The group recognizes net losses incurred by investee to the extent that the carrying value of long-term equity investments and other long-term interests substantially constituting net investments in investee are written down to zero, except where the group is obliged to bear additional losses. The difference between the book value of long-term equity investment and actual acquisition cost shall be recognized in the gain or loss of investment when the long-term equity investment is disposed of. For long-term investments accounted under equity method, other comprehensive income recorded shall be accounted on the same basis as the investee directly disposing of related assets or liability when equity method is not used any longer. The movements of shareholder’s equity, other than the net profit or loss, other comprehensive income and profit distribution previously recorded in the shareholder’s equity of the Company are recycled to investment income for the period on disposal. If the remaining equity after the partially disposal is still accounted for under the equity method, the relevant other comprehensive income previously recognized under the equity method, is treated on the same basis as the direct disposal of the relevant assets or liabilities by the investee and is carried forward on a proportional basis, and the owner's equity, which is apart from net profit and loss, other comprehensive income and profit distribution of the investee, shall be recognized and proportionally transfers to current investment income. Where the entity has no longer joint control or significant influence in the investee company as a result of partially disposal of the investment, the remaining investment will be accounted for in line with the Recognition and Measurement of Financial Instruments Standard -No 22 of Accounting Standards for Business Enterprises(No7 Caikuai [2017]), and the difference between the fair value of remaining investment at the date of losing joint control or significant influence and its carrying amount shall be recognized in the profit or loss for the year. Where the entity has no longer control over the investee company as a result of partially disposal of the investment, the remaining investment will be changed to be accounted for using equity method providing remaining joint control or significant influence over the investee company. The difference between carrying amount of disposed investment and consideration received actually shall be recognized as investment gain or loss for the period, and investment shall be adjusted accordingly as if it was accounted for under equity model since acquisition. Where the entity has on longer joint control or significant influence in the investee as a result of disposal, the investment shall be accounted for in accordance with the Recognition and Measurement of Financial Instruments Standard -No 22 of Accounting 80 Standards for Business Enterprises(No7 Caikuai [2017]), and difference between the carrying amount and disposal consideration shall be recognized as investment gain or loss for the period, and the difference between the fair value of remaining investment at the date of losing control and its carrying amount shall be recognized in the profit or loss for the year. 15. Investment property Investment property is held to earn rentals or for capital appreciation or both and includes property, building and use right of land. They are measured at cost model. Investment property is depreciated or amortized on straight line basis and its expected useful life, net residual value rate and annual depreciation rate is as follows: Useful life Estimated net residual value Annual Category (years) rate (%) depreciation rate Use right of land 50 0 2 Property and Buildings 40 3/10 2.25-2.43 16. Fixed assets Recognition criteria of fixed assets: defined as the tangible assets which are held for the purpose of producing goods, rendering services, leasing or for operation & management, and have more than one year of useful life. Fixed assets shall be recognized when the economic benefit probably flows into the group and its cost can be measured reliably. Fixed assets include: building, machinery, transportation equipment, electronic equipment and others. All fixed assets shall be depreciated unless the fixed assets had been fully depreciated and are still being used and land is separately measured. Straight-line depreciation method is adopted by the group. Estimated net residual value rate, useful life, depreciation rate as follows: Useful life Estimated net residual Annual depreciation No Category (years) value rate (%) rate (%) 1 Property and Buildings 20-40 3、5、10 2.25-4.85 2 Machinery equipment 5-22 0.5-1、3、5、10 4.09-19.90 3 Transportation equipment 5-12 1、3、5、10 7-33.33 4 Electronic equipment &others 3-15 0-1、3、5、10 6-33.33 The group should review the estimated useful life, estimated net residual value and depreciation method at the end of each year. If any change has occurred, it shall be regarded as a change in the accounting estimates. 17. Construction in progress 81 The cost of construction in progress is determined according to the actual construction expenditure, including the necessary construction expenditure incurred during the construction period, the capitalized borrowing cost and other related expenses before the construction reaches the condition expected for use. Constructions in progress are transferred to fixed assets based on the construction budget and actual costs on the date when completing and achieving estimated usable status, and the fixed assets should be depreciated in the next month. Adjustment will be made upon confirmation of their actual values after implementing the completion and settlement procedures. The construction in progress shall be transferred to fixed assets when it reaches the expected usable state, and the criteria are as follows: Items Criteria of transferring to FA Property and Buildings Earlier of actual starting of use and completion of inspection Machinery equipment Earlier of actual starting of use and completion of installation / inspection 18. Intangible asset The group’s intangible assets include use right of land, patents, non-patented technologies and others. They are measured at actual cost at acquisition day. For acquired assets, the actual cost is measured at actual price paid and relevant other expenses. Invested intangible asset shall be measured at actual cost as contracted or agreed value, however fair value will be taken if the contracted or agreed value is not fair. (1) Useful life and the basis for recognition, estimation, amortization method or review procedure Use right of land shall be amortized evenly within the amortization period since the remised date. Patents, technologies and other intangible assets are amortized over the shortest of their estimated useful life, contractual beneficial period and useful life specified in the law. Amortization charge is included in the cost of assets or expenses, as appropriate, for the period according to the usage of the assets. At the end of the year, for definite life of intangible assets, their estimated useful life and amortization method shall be assessed. Any change shall be treated as change on accounting estimate. (2) The scope and accounting of research and development The group separates the expenditure on internal research and development projects into research phase expenditure and development phase expenditure. At research phase, expenditure are expenses directly relevant to research activity, including R&D employee’s salary, materials, depreciation, technology cooperation cost and assessment testing fees. At development phase, expenses can be capitalized only when meeting the following conditions: (a)the technical feasibility of completing the intangible asset so that it will be available for 82 use or sale. (b)its intention to complete the intangible asset and use or sell it. (c)how the intangible asset will generate probable future economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset. (d)the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset. (e)its ability to measure reliably the expenditure attributable to the intangible asset during its development. Any expenditure not qualifying for the above conditions shall be accounted into profit and loss account. The projects expenditure will go to the development stage and start to be capitalized after meeting the above conditions, and passing the technical feasibility and economic feasibility studies, and being approved after evaluation. 19. Impairment of long-term assets The group assesses whether there is any indication that long-term equity investment, investment property under cost model, fixed assets, construction in progress, right-of-use asset and intangible assets with definite useful life may be impaired. If there is any indication that an asset may be impaired, the asset will be tested for impairment. Goodwill and intangible asset with infinite useful life and development cost not reaching available for use status, are tested for impairment annually no matter there is any indication of impairment or not. (1) Non-current asset impairment excluding financial asset (expect goodwill) When testing the impairment, the group recognized the recoverable amount of an asset, which the higher of its fair value less costs to sell and the present value of the future cash flows expected to be derived from the asset. After impairment test, any difference of carrying amount over its recoverable amount shall be recognized as impairment loss. The group estimates recoverable amount based on an individual asset. If it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount is determined on the basis of the asset groups or asset portfolio to which the asset belongs. Asset portfolio is determined based on whether the major cash inflow generated by the asset group is independent from the cash inflow of other assets or the asset portfolio. Net amount which FV less disposal cost is reference to the agreed sale price or observable market price for similar asset within the arm length transaction. When estimating the present 83 value of future cash flows, management must estimate the expected future cash flows of the asset or group of assets and select an appropriate discount rate to determine the present value of future cash flows. (2) Goodwill impairment The group allocates the carrying value of the goodwill generated from the business combination to the relevant asset group or to the relevant asset group combination which is difficult to allocate to the relevant asset group,in a reasonable way from the date of purchase. When conducting impairment tests on goodwill contained within the related asset group or asset group combination, if there are signs of impairment in the asset group or asset group combination related to goodwill, the impairment test shall firstly be conducted on the asset group or asset group combination excluding goodwill, and the recoverable amount shall be calculated and compared with the relevant carrying value so to recognize the corresponding impairment loss; Then, an impairment test is conducted on the asset group or asset group combination containing goodwill to compare the carrying value with the recoverable amount. If the recoverable amount is lower than the carrying value, the impairment loss amount is first offset against the carrying value of goodwill allocated to the asset group or asset group combination, and then offset the carrying value of the asset group and asset group combination based on the proportion of the carrying value of other assets in the asset group or asset group combination without goodwill. The methodology, parameters and assumptions of the goodwill impairment test are referred in Notes VI.19. Once the impairment loss on the assets is recognized, it can not be reversed in a subsequent period. 20. Long-term prepaid expense The group's long-term prepaid expense refers to landscape fees, renovation &decoration expenses and other expenses paid and should be allocated over 1year.It will be amortized evenly within its beneficial period. The remaining unamortized expense should be charged into income statement if long-term prepaid expense can not bring the beneficial inflows. Landscape fees will be amortized for 10 years and renovation& decoration fees will be amortized for 5-10 years. 21. Employee benefits Employee’s benefit comprises short-term benefit, post-employment benefit, termination benefit and other long-term employee’s benefit. Short-term benefit includes salary, bonus, allowance, welfare, social insurance, housing funds, labor union expense, staff training expense, during the period in which the service rendered by the employees, the actually incurred short term employee benefits shall be recognized as 84 liability and shall be recognized in P&L or related cost of assets based on benefit objective allocated from the service rendered by employees. Post-employment benefits include the basic pension scheme and unemployment insurance etc. Based on the risk and obligation borne by the Company, post-employment benefits are classified into defined contribution plan and defined benefit plan. For defined contribution plan, liability shall be recognized based on the contributed amount made by the Company to separate entity at the balance sheet date in exchange of employee service for the period and it shall be recorded into current profit and loss account or relevant cost of assets in accordance with beneficial objective. Other long-term employee’s benefit refers to all other employee benefits other than short-term benefit, post-employment benefit and termination benefit. 22. Provision When the Company has transactions such as commitment to externals, discounting the trade acceptance note, unsettled litigation or arbitration which meets the following criterion, provision should be recognized: It is the Company's present obligation; carrying out the obligation will probably cause the Company's economic benefit outflow; the obligation can be reliably measured. Provision is originally measured on the best estimate of outflow for paying off the present obligations. When determining the best estimate, need to consider the risk, uncertainty, time value of monetary relevant to contingent items. The group needs to review the present best estimate and accordingly adjust the carrying value of the provision account. 23. Revenue recognition and measurement The group recognizes revenue when it has fulfilled its contractual performance obligations, i.e. when the customer has obtained control of the relevant goods or services. Control right of goods or services refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset. If the contract between the group and the customer meets the following five conditions at the same time, the group has fulfilled the performance obligation when the customer obtains the control of the relevant goods or services, and the revenue is recognized: 1) the parties to the contract have approved the contract and promised to fulfill their own obligations; 2) the contract specifies the rights and obligations of parties related to the transferred commodities; 3) the contract has explicit payment terms related to the transferred goods; 4) the contract has commercial substance, where the performance of the contract will change 85 the company's future cash flow risk, time distribution or amount; 5) the consideration to which the company is entitled as a result of the transfer of goods to the customer is likely to be recovered. When the group transfers control of a good or service over time, it satisfies a performance obligation and recognizes revenue over time only if one of the following criteria is met, otherwise it shall be the performance obligation at a point in time. (1) the customer simultaneously receives and consumes the benefits provided by the entity’s performance as the entity performs (2) the group’s performance creates or enhances an asset (for example, work in progress) that the customer controls as the asset is created or enhanced (3) the group’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date (1) Revenue policy from sales The group’s revenue mainly includes income from sale of goods and installation of the whole set of refrigeration engineering project. Based on the actual situation, the group recognizes the revenue as the followings; 1) Domestic sales: the sales contract with customers generally includes the performance of obligation of transferring goods. The group recognizes the revenue at the time when the arrival acceptance is completed by customers, having taken all followings into consideration: present debt collection right entitled to the sales of goods, the transfer of the main risks and rewards in the ownership of the goods, the transfer of the legal ownership entitled to the goods, the transfer of physical assets, the acceptance of goods by customers. 2) Export sales: the group will recognize the sales revenue after completing the customs declaration and export procedures. Revenue from installation of the whole set of refrigeration engineering project. In the refrigeration installation contract between the group and the customer, since the equipment sales and installation services cannot be distinguished separately, the entire project contract is regarded as a single performance obligation, and the revenue of the single performance obligation is recognized at the completion of the customer acceptance. when a performance obligation over time is satisfied, revenue shall be recognized within the contract term according to the performance progress, which is determined by the percentage of the cumulative actual cost to expected total contract cost. When the performance progress can not be estimated reasonably, the group recognizes the revenue to the extent where the already incurred cost can be compensated until the performance progress can be decided. (2) Determining and allocating the transaction price 86 If the contract includes two or more performance obligations, at the inception date of contract, the group shall allocate the transaction price to each performance obligation identified in the contract on a relative standalone selling price ratio basis and measure the revenue at the allocated transaction price to each performance. If any solid evidence indicates that contract discount is only relevant to one or some (not all) performance obligations, the discount shall be allocated into the one or these performance obligations. An amount of consideration can vary because of cash discounts, price guarantee. The group determines the best estimate of the variable consideration in line with the expectation or the amount that most probably incurred, but includes, in the transaction price, the variable consideration not exceeding the amount that is highly unlikely to result in a material reversal of cumulative revenue recognized when the relevant uncertainty is eliminated. The group accounts for consideration payable to a customer as a reduction of the transaction price and, therefore, of revenue unless the payment to the customer is in exchange for a distinct good or service. Accordingly, the revenue shall be recognized at the later of the revenue recognition and the consideration paid to a customer. For sales with a right of return, the group recognizes the revenue for the consideration expected to have the right to receive arising from transferring the goods to customers when the customer receives the control right over the relevant goods, and recognizes the expected refund amount as provision. At the same time, receivable of return cost, as an asset, shall be recognized for the carrying value of the returned goods when it is expected to be transferred less expected cost for getting it back (including decline in value) and net amount of the above asset cost shall be carried over to the cost. At every balance sheet date, the group will reassess the future sales returns and remeasure the above assets and liabilities. Where a significant financing component exists in the contract, the transaction price shall be measured at the assumed price that the payment is made by cash when the client receives the control right of goods or services. The difference between the promised consideration and the determined transaction price shall be amortized within the contract period using effective interest rate, and it is the discounting rate at which the dominated price of the contract consideration is discounted to the cash price. According to the agreement or the regulation etc., the group provide warranty for the goods sold and it is the quality assurance for promising the goods are in commodity with the agreed standards and shall be accounted for as Note III、22 provision. 24. Government grants Government grant shall be recognized only when all attached conditions are met and the grant is possibly received. Where a government grant is in the form of a transfer of monetary asset, it is measured at the amount received. Where a government grant is made on the basis of 87 fixed amount or conclusive evidence indicates relevant conditions for financial support are met and expect to probably receive the fund, it is measured at the amount receivable. Where a government grant is in the form of a transfer of non-monetary asset, it is measured at fair value. If fair value cannot be determined reliably, it is measured at a nominal amount of RMB1 Yuan. Assets-related government grant is the government fund obtained by the group for the purpose of long-term assets purchase and construction or establishment in the other forms. Income-related grants are the grant given by the government apart from the assets-related grants. If no grant objective indicated clearly in the government documents, the group shall judge it according to the principle mentioned above. If the grant is difficult to be separated, it shall be considered as income-related grant as a whole. Assets-related government grants are recognized as deferred income, which shall be evenly amortized to profit or loss over the useful life of the related asset. Any assets are sold, transferred, disposed of or impaired earlier than their useful life expired date, the remaining balance of deferred income which hasn’t been allocated shall be carried forward to the income statement when the assets are disposed of. Income-related government grants that is a compensation for related expenses or losses to be incurred in subsequent periods are recognized as deferred income and credited to the relevant period when the related expenses are incurred. Government grants relating to compensation for related expenses or losses already incurred are charged directly to the profit or loss for the period. Government grants related to daily business, shall be recognized as other income in accordance with business nature or offsetting related expenses, otherwise, shall be recognized as non-operating income or expenses. 25. Deferred tax assets and deferred tax liabilities The deferred income tax assets or the deferred income tax liabilities should be recognized according to the differences (temporary difference) between the carrying amount of the assets or liabilities and its tax base and the difference between the carrying amount of tax base item and its tax base. Deferred tax liability shall be recognized for all taxable temporary difference apart from the followings : (1) temporary differences arise from the initial recognition of goodwill or the initial recognition of assets or liabilities arising from non-business combinations that do not affect accounting profits or taxable income (or deductible losses); (2) The group is able to control the timing of the reversal of taxable temporary differences related to investments in subsidiaries, associates, and joint ventures, and such temporary differences are likely not to be reversed in the foreseeable future. The group recognizes deferred income tax assets for deductible temporary differences, 88 deductible losses, and tax deductions that are likely to be obtained to offset future taxable income, except for the following situations: (1) the initial recognition of assets or liabilities arising from non-business combination transactions where temporary differences do not affect accounting profits or taxable income (or deductible losses); (2) Deductible temporary differences related to investments in subsidiaries, associates, and joint ventures that cannot simultaneously meet the following conditions: temporary differences are likely to be reversed in the foreseeable future, and taxable income is likely to be obtained in the future to offset deductible temporary differences. The group recognizes deferred income tax assets for all unused deductible losses to the extent that there is likely to be sufficient taxable income to offset the deductible losses. The management uses plenty of judgment to estimate the timing and amount of future taxable income, combined with tax planning strategies, to determine the amount of deferred income tax assets, which results in uncertainty. On the balance sheet date, deferred income tax assets and deferred income tax liabilities are measured at the applicable tax rate during the expected period of asset recovery or liability settlement. When the following conditions are met simultaneously, the group shall present the deferred income tax assets and deferred income tax liabilities at the net amount after offsetting: The group has the legal right to settle the current income tax assets and deferred income tax liabilities at the net amount; Deferred income tax assets and deferred income tax liabilities are related to the income tax levied by the same tax collection and management authority on the same taxpayer or on different taxpayers. However, in the future, within the term when each significant deferred income tax asset and deferred income tax liability to be reversed, the involved taxpayers intend to settle the current income tax assets and liabilities on a net basis or acquire assets and settle debts simultaneously. 26. Lease (1) Lease identification Lease: A contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. At inception of a contract, the group shall assess whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an or many identified assets for a period of time in exchange for consideration. For a contract that is, or contains several leases, the group shall separate the contract and account each lease separately. The group shall account for each lease component separately from non-lease components of the contract if the contract contains lease and non-lease components. Each leasing part is accounted for according to the leasing standards, while the 89 non-leasing part is accounted for according to other applicable accounting standards. If the contract includes both leasing and non-leasing parts, the group, as the lessor, will split the leasing and non-leasing parts and conduct accounting treatment separately. Each leasing part will be accounted for according to the leasing standards, while the non-leasing part will be accounted for according to other applicable accounting standards. As the lessee, the group chooses not to separate the lease and non-lease, and joins each leased part and its non- leased parts separately into a lease, accounting treatment shall be carried out in accordance with leasing standards; However, if the contract includes embedded derivative instruments that should be split, the group will not merge them with the leasing portion for accounting treatment. (2) As a leasee 1) Recognition At the commencement date, the group as a lessee shall recognize a right-of-use asset and a lease obligation except short-term lease and low value asset lease. Right-of-use assets represents a lessee’s right to use an underlying asset for the lease term, and is initially measured at cost. The cost of the right-of-use asset shall comprise: ① the amount of the initial measurement of the lease liability, ② any lease payments made at or before the commencement date, less any lease incentives received, which is the incremental cost for the lease ③ any initial direct costs incurred by the lessee which is the incremental cost ④ an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease, unless those costs are incurred to produce inventories. Where the group remeasures the lease liability in accordance with the relevant provisions of the leasing standard, the carrying value of right-of-use asset is adjusted accordingly. The group shall follow the following principles when determining the depreciation life of the right-of-use asset: if the ownership of the leased asset can be reasonably determined at the end of the lease term, depreciation shall be calculated and deducted during the remaining service life of the leased asset; Where it is not certain that the ownership of the leased asset can be acquired at the end of the lease term, depreciation shall be calculated at the shorter of the lease term and the remaining service life of the leased asset. The depreciation amount shall be accounted into cost of assets or profit and loss account. At the commencement date, a lessee shall measure the lease liability at the present value of 90 the lease payments that are not paid at that date. The lease payments included in the measurement of the lease liability comprise the following payments for the right to use the underlying asset during the lease term that are not paid at the commencement date: ① fixed payments (including in-substance fixed payments) less any lease incentives receivable;② variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;③ the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; ④ payments of penalties for terminating the lease, if the lessee will certainly exercise an option to terminate the lease during the lease term;⑤ amounts expected to be payable by the lessee under residual value guarantees. When calculating the present value of the lease payments, interest rate implicit in the lease shall be used. If the rate cannot be readily determined, the group shall use the lessee’s incremental borrowing rate. Interest on the lease liability in each period during the lease term shall be calculated based on a constant periodic rate of interest, and be recognized as in profit or loss unless its capitalization. After the lease commencement date, the group increases the carrying amount of lease liability when recognizing the interest on lease liability and; decreases the carrying amount of lease liability when making lease payment. The group remeasures the lease liability in accordance with the present value of revised lease payment, when the followings incur: ①change of in-substance fixed payments (subject to original discounting rate) ② change of amounts expected to be payable under residual value guarantees(subject to original discounting rate) ③ change of an index or a rate used for future lease payments(subject to revised discounting rate) ④ change in assessment of a buy option(subject to revised discounting rate) ⑤ change in assessment of a renew option or termination option or actual situation(subject to revised discounting rate). 2) Short-term lease and low value asset lease The group has chosen not to recognize the right-of-use asset and lease liability for short-term lease (lease term less than 12 months) and low value asset (30,000 Yuan) when it is single leased new asset. In this case, lease payment will be accounted directly in profit or loss or on the straight-line basis in profit or loss. 3) Sales and lease back The group, as a seller and a lease within the sales and lease back transaction, assesses whether the transfer of the asset is a sale. If the transfer of assets is not a sale, the group shall continue to recognize the transferred assets and at the same time recognize a financial liability equal to the transfer income (Note VI. 34 lease). If the transfer of assets is a sale, the group shall measure the right-of-use asset arising from the leaseback at the proportion of the previous 91 carrying amount of the asset that relates to the right of use retained by the group. Accordingly, the group shall recognize only the amount of any gain or loss that relates to the rights transferred to the buyer-lessor. (3) As a lessor The group, as a lessor, classified it as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset unless an operating lease. 1) Financing lease At the commencement date, the group shall recognize the lease payment receivable and derecognize of finance lease asset. When initially measuring the lease payment receivable, net lease investment value shall be used for the lease payment receivable. Net lease investment value equals to the any residual value guarantees plus the PV of undue lease receivable discounted at the interest rate implicit in the lease. The group shall recognize interest income over the lease term based on a constant periodic rate. The variable lease payment obtained by the group related to operating leases, which are not included in the net lease investment, shall be accounted for in the current profit and loss when actually incurred 2) Operating lease Lease payment received shall be recognized as lease income on a straight-line basis within the period. The initial direct expenses incurred by the group in relation to operating leases are capitalized to the cost of leasing the underlying asset and are recognized in profit or loss by instalments over the lease period on the same basis as rental income. Variable lease payments made by the group in relation to operating leases that are not included in lease collections are recognized in profit or loss for the period when they are actually incurred. The group shall account for a modification to an operating lease as a new lease from the effective date of the modification, considering any received in advance or lease payments receivable relating to the original lease as part of the lease payments receivable for the new lease 27. Fair value measurement The group measures investment property, derivative financial instruments and equity instruments at fair value at each balance sheet date. Fair value refers to the price that market participants can receive by selling an asset or can pay for transferring a liability in an orderly transaction that takes place on the measurement date. Assets and liabilities measured or disclosed at fair value in the financial statements are determined to belong to the different fair value level based on the lowest level of input values that are significant to the fair value measurement as a whole: level 1 input is the unadjusted 92 quoted price for identical asset or liability available at the active market on the measurement date; level 2 input is the directly or indirectly observable input for relevant asset or liability apart from level 1 input; level 3 input is the unobservable input for relevant asset or liability. (For levels 1 and 2) For financial instruments traded in an active market, the group determines their fair value by their active market quotes; For financial instruments that are not traded in an active market, the group uses valuation techniques to determine their fair value, and the valuation model used is mainly the discounted cash flow model. The input of valuation techniques mainly includes: risk-free interest rate of debt, credit premium and liquidity premium; estimator coefficient. and liquidity discount of equity. (For level 3) The fair value of level 3 is determined on the basis of the group's valuation models, such as the discounted cash flow model. The group also considers the initial transaction price, recent transactions of the same or similar financial instruments, or full third-party transactions of comparable financial instruments. As at 31 December 2023, level 3 financial assets measured at fair value are valued by using significant unobserved inputs such as discount rates, but their fair value is not materially sensitive to reasonable changes in these significant unobserved inputs. The group uses the market approach to determine the fair value of unlisted equity investments. This requires the group to determine comparable listed companies, select market coefficient, estimate liquidity discounts, etc., and is therefore subject to uncertainty. 93 IV. Changes in Accounting Policies, Accounting Estimates (1) Change in significant accounting policies Changes on accounting policy and reasons Memo Since January 1, 2023, the Company has implemented the provisions of the Interpretation of Accounting Standards for Business Enterprises No. 16 promulgated by the Ministry of Finance, "Accounting treatment of deferred income tax related to assets and liabilities arising from single transactions is not applicable to the initial recognition exemption". Individual transactions to which the provision applies that occur between the beginning of the earliest period of presentation of the financial statements in which the provision is first applied and the date of the first implementation are adjusted according to the provision. Taxable temporary differences and deductible temporary differences arise in respect of lease liabilities and use rights assets recognized at the beginning of the earliest period of presentation of the financial statements for which the provision is first applied, as well as in respect of anticipated liabilities related to the disposal obligation recognized and corresponding related assets, In accordance with this provision and the provisions of Accounting Standard for Business Enterprises No. 18 - Income Tax, the cumulative impact is adjusted to the opening retained earnings and other related financial statement items for the earliest period in which the financial statements are presented. (2) Affected items and amount January 1, 2023 (Jan-Dec, 2022) Affected items Before Adjusted After adjustment adjustment amount deferred tax liability 52,306,365.68 78,166.60 52,384,532.28 surplus reserve 825,226,634.15 -4,594.76 825,222,039.39 unappropriated profit 618,445,922.58 -65,810.05 618,380,112.53 minority interest 54,077,970.99 -7,761.79 54,070,209.20 income tax 1,054,609.62 -477,793.34 576,816.28 profit or loss of minority interest 1,633,633.87 1,154.31 1,634,788.18 94 (3) Changes in significant accounting estimates No. V. Taxation 1. The main applicable tax and rate to the Company as follows: Tax Tax base Tax rate Value-added tax (VAT) Sales revenue or Purchase 5%、6%、9%、13%、 City construction tax Value-added tax payables 5%、7% Education surcharge Value-added tax payables 3% Local education surcharge Value-added tax payables 2% Enterprise income tax (EIT) Current period taxable profit 15% or 25% 70% of cost of own property Real estate tax or revenue from leasing 1.2% or 12% property Land use tax Land using right area Fixed amount per square meter According to the relevant Other tax provisions of the state and local Notes for tax entities with different EIT rate Tax entities EIT rate Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd 15% Dalian Bingshan Group Engineering Co., Ltd. 25% Dalian Bingshan Group Sales Co., Ltd. 25% Dalian Bingshan Air-conditioning Equipment Co., Ltd. 15% Dalian Bingshan Guardian Automation Co., Ltd. 15% Dalian Bingshan-RYOSETSU Quick Freezing Equipment Co., Ltd. 25% Wuhan New World Refrigeration Industrial Co., Ltd. 15% Dalian Bingshan Engineering & Trading Co., Ltd 25% Dalian Universe Thermal Technology Co., Ltd. 15% Chengdu Bingshan Refrigeration Engineering Co., Ltd. 25% Wuhan New World Air-conditioning Refrigeration Engineering Co., Ltd 25% Wuhan Lanning Energy Technology Co., Ltd 25% Sonyo Compressor (Dalian)Co., Ltd. 15% Sonyo Refrigeration System (Dalian) Co., Ltd. 15% Sonyo Refrigeration (Dalian) Co., Ltd. 15% 95 2. Tax preference (1) The Company obtained the qualification of high and new technology enterprises in December, 2023. The Certificate No. is GR202321201041. According to the tax bureau approval, the Company can be granted for the preferential tax policy of enterprise income tax rate of 15% from FY2023 to FY2025. The Company’s subsidiary, Dalian Bingshan Air-conditioning Equipment Co., Ltd. obtained the qualification of high and new technology enterprises in December, 2023. The Certificate No. is GR202321201161. According to the tax bureau approval, the Company can be granted for the preferential tax policy of enterprise income tax rate of 15% from FY2023 to FY2025. The Company’s subsidiary, Dalian Bingshan Guardian Automation Co., Ltd. obtained the qualification of high and new technology enterprises on 15th December, 2021. The Certificate No. is GR202121200765. According to the tax bureau approval, the Company can be granted for the preferential tax policy of enterprise income tax rate of 15% from FY2021 to FY2023. The Company’s subsidiary, Wuhan New World Refrigeration Industrial Co., Ltd obtained the qualification of high and new technology enterprises on 15th November, 2021. The Certificate No. is GR202142001696. According to the tax bureau approval, the Company can be granted for the preferential tax policy of enterprise income tax rate of 15% from FY2021 to FY2023. The Company’s subsidiary, Dalian Universe Thermal Technology Co., Ltd. obtained the qualification of high and new technology enterprises in December, 2023. The Certificate No. is GR202321200114. According to the tax bureau approval, the Company can be granted for the preferential tax policy of enterprise income tax rate of 15% from FY2023 to FY2025. The Company’s subsidiary, Sonyo Compressor (Dalian)Co., Ltd. (hereinafter referred to as “Sonyo Compressor” obtained the qualification of high and new technology enterprises in October, 2021. The Certificate No. is GR202321201152. According to the tax bureau approval, the Company can be granted for the preferential tax policy of enterprise income tax rate of 15% from FY2021 to FY2023. The Company’s subsidiary, Sonyo Refrigeration System (Dalian) Co., Ltd. (hereinafter referred to as “Sonyo Refrigeration System” obtained the qualification of high and new technology enterprises in December, 2023. The Certificate No. is GR202321201152. According to the tax bureau approval, the Company can be granted for the preferential tax policy of enterprise income tax rate of 15% from FY2023 to FY2025. The Company’s subsidiary, Sonyo Refrigeration (Dalian) Co., Ltd. (hereinafter referred to as “Sonyo Refrigeration” obtained the qualification of high and new technology enterprises in October, 2021. The Certificate No. is GR202121200368. According to the tax bureau approval, the Company can be granted for the preferential tax policy of enterprise income tax rate of 15% from FY2021 to FY2023. 96 (2) According to the Announcement of the Ministry of Finance and Tax Administration on the accelerate VAT Deduction for advanced manufacturing enterprise (Announcement No. 43, 2023), within the period from January 1st, 2023 to December 31st,2027, the advance enterprises are allowed for input VAT deduction at 5% acceleration rate during the current period. The Company and its subsidiaries, Dalian Bingshan Air-conditioning Equipment, Dalian Bingshan Guardian Automation, Wuhan New World Refrigeration, Dalian Universe Thermal, Sonyo Compressor, Sonyo Refrigeration and Sonyo Refrigeration System enjoy the tax preference. VI. Notes to Consolidated Financial Statements The following disclosure date on this financial statement without special indication, “opening” refers to January 1, 2023; “closing” refers to December 31, 2023; “current period” refers to the period from January 1, 2023 to December 31, 2023; and “last period” refers to the period from January 1, 2022 to December 31, 2022; with the currency unit RMB. 1. Monetary fund Item Closing Balance Opening Balance Cash on hand 70,750.93 80,702.47 Cash in bank 863,950,616.72 922,122,608.84 Other cash and cash equivalents 87,018,202.46 83,962,587.87 Total 951,039,570.11 1,006,165,899.18 Including: sum of deposits overseas - - Note: within the bank deposits, $170,321,702.76 was time deposits and interest income; Other monetary funds are bank acceptance deposit 44,200,486.65 Yuan, guarantee deposit 41,547,977.10 Yuan and migrant worker deposit 1,229,741.67 Yuan. 2. Notes receivable (1) Category of notes receivable Items Closing Balance Opening Balance Bank acceptance notes 335,914,443.51 493,019,785.95 Trade acceptance notes 17,514,478.91 12,925,475.23 Total 353,428,922.42 505,945,261.18 97 (2) Categories according to bad debts provision method Closing Balance Items Booking balance Provision Booking value Amount % Amount % Bad debts provision based on 354,313,722.61 100.00 884,800.19 0.25 353,428,922.42 group Including: bank 335,914,443.51 94.81 - - 335,914,443.51 acceptance notes Trade acceptance 18,399,279.10 5.19 884,800.19 4.81 17,514,478.91 notes Total 354,313,722.61 100.00 884,800.19 0.25 353,428,922.42 (Continued) Opening balance Items Booking balance Provision Booking value Amount % Amount % Bad debts provision based on 506,921,135.95 100.00 975,874.77 0.19 505,945,261.18 group Including: bank 493,019,785.95 97.26 - - 493,019,785.95 acceptance notes Trade acceptance 13,901,350.00 2.74 975,874.77 7.02 12,925,475.23 notes Total 506,921,135.95 100.00 975,874.77 0.19 505,945,261.18 Categories based on group Closing Balance Items Booking balance Provision Provision(%) Bank acceptance notes 335,914,443.51 - - Trade acceptance notes 18,399,279.10 884,800.19 4.81 Total 354,313,722.61 884,800.19 — 98 (3) Bad debt provision of notes receivable accrued, collected and reversed Change during the year Opening Category Collected/ Closing Balance balance Accrued Written-off reversed Bad debt 975,874.77 91,074.58 - 884,800.19 provision Total 975,874.77 91,074.58 - 884,800.19 (4) Pledged notes receivable up to the end of year. Items Closing pledged amount Bank acceptance notes 4,939,655.20 Total 4,939,655.20 (5) Notes receivable endorsed or discounted but not mature at the end of year Item Closing amount no more Closing amount still recognized recognized Bank acceptance notes - 151,261,975.36 Trade acceptance notes - 320,700.00 Total - 151,582,675.36 (6) Notes receivable written off: none 3. Accounts receivable (1) Aging of accounts receivable Account Age Closing Balance Opening Balance Within 1 year(incl 1 year) 1,075,007,175.23 1,051,342,084.70 1-2 years 406,082,608.66 271,031,036.91 2-3 years 207,201,791.50 187,045,709.96 Over 3 years 453,345,639.16 392,478,408.13 Of which: 3-4years 140,135,046.24 69,585,549.01 4-5years 48,619,109.18 138,624,250.54 Over 5 years 264,591,483.74 184,268,608.58 Total 2,141,637,214.55 1,901,897,239.70 99 (2) Category of accounts receivable based on bad debt provision method Closing Balance Items Booking balance Provision Booking value Amount % Amount % Bad debt provision 14,372,020.85 0.67 11,564,470.39 80.47 2,807,550.46 on individual basis Bad debt provision 2,127,265,193.70 99.33 553,638,820.00 26.03 1,573,626,373.70 on group Including: aging as characteristics of 2,127,265,193.70 99.33 553,638,820.00 26.03 1,573,626,373.70 credit risk Total 2,141,637,214.55 100.00 565,203,290.39 26.39 1,576,433,924.16 (Continued) Opening balance Items Booking balance Provision Booking value Amount % Amount % Bad debt provision 13,181,314.30 0.69 10,348,880.50 78.51 2,832,433.80 on individual basis Bad debt provision 1,888,715,925.40 99.31 481,569,916.25 25.50 1,407,146,009.15 on group Including: aging as characteristics of 1,888,715,925.40 99.31 481,569,916.25 25.50 1,407,146,009.15 credit risk Total 1,901,897,239.70 100.00 491,918,796.75 25.86 1,409,978,442.95 100 1) Bad debt provisions on individual basis Opening balance Closing Balance Name Accounts Provision for Accounts Provision for Proportion Reason receivable bad debts receivable bad debts (%) Full Company recovery 6,032,000.00 4,780,096.20 6,496,000.00 5,244,096.20 80.73 1 is not expected Other Recovery company 7,149,314.30 5,568,784.30 7,876,020.85 6,320,374.19 80.25 is not 1 expected Total 13,181,314.30 10,348,880.50 14,372,020.85 11,564,470.39 — 2) Bad debt provisions on group basis Closing Balance Aging Accounts Provision for Drawing proportion receivable bad debts (%) Within 1 year 1,075,007,175.23 61,229,181.77 5.70 1 to 2 years 403,753,793.79 67,078,438.64 16.61 2 to 3 years 201,613,496.72 61,315,691.42 30.41 3 to 4 years 139,220,135.04 68,416,921.28 49.14 4 to 5years 43,079,109.18 31,007,103.15 71.98 Over 5 years 264,591,483.74 264,591,483.74 100.00 Total 2,127,265,193.70 553,638,820.00 — (4) Bad debt provision of current period Change during the year Opening Closing Category Collected/ balance Accrued Written-off Others Balance reversed Bad debt 491,918,796.75 68,147,779.35 - 6,532,243.60 11,668,957.89 565,203,290.39 provision Total 491,918,796.75 68,147,779.35 - 6,532,243.60 11,668,957.89 565,203,290.39 Note: others are from consolidation of Sonyo Refrigeration (Dalian) Co., Ltd. 101 (4) Accounts receivable written off in current period Item Written off amount Receivable actually written off 6,532,243.60 (5) Top 5 receivables and contract assets The sum of top 5 of receivables and contract assets is 240,544,632.79Yuan, represents 9.92% of closing balance of receivables and contract assets and bad debt provision of 49,664,315.90Yuan shall be made. 4. Contract asset (1) contract asset Closing Balance Items Booking balance Provision Carrying amount Undue warranty 265,440,261.85 37,369,046.20 228,071,215.65 Unsettled receivable of revenue 18,840,435.97 9,834,772.91 9,005,663.06 recognized over time Total 284,280,697.82 47,203,819.11 237,076,878.71 (continued) Opening balance Items Booking balance Provision Carrying amount Undue warranty 210,149,278.14 31,927,565.84 178,221,712.30 Unsettled receivable of revenue 61,997,091.19 14,427,927.71 47,569,163.48 recognized over time Total 272,146,369.33 46,355,493.55 225,790,875.78 (2) Significant change of the account Items Amount Reason Undue warranty 49,849,503.35 Change of consolidation scope Unsettled receivable of revenue -38,563,500.42 Settled during the year recognized over time Total 11,286,002.93 — 102 (3) Category of contract asset based on bad debt provision method Closing Balance Items Booking balance Provision Booking value Amount % Amount % Bad debt provision 1,709,948.80 0.60 1,709,948.80 100.00 - on individual basis Bad debt provision 282,570,749.02 99.40 45,493,870.31 16.10 237,076,878.71 on group Including: aging as characteristics of 282,570,749.02 99.40 45,493,870.31 16.10 237,076,878.71 credit risk Total 284,280,697.82 100.00 47,203,819.11 16.60 237,076,878.71 (continued) Opening Balance Items Booking balance Provision Booking value Amount % Amount % Bad debt provision 2,722,948.80 1.00 2,722,948.80 100.00 - on individual basis Bad debt provision 269,423,420.53 99.00 43,632,544.75 16.19 225,790,875.78 on group Including: aging as characteristics of 269,423,420.53 99.00 43,632,544.75 16.19 225,790,875.78 credit risk Total 272,146,369.33 100.00 46,355,493.55 17.03 225,790,875.78 1) Bad debt provisions on individual basis Opening balance Closing Balance Name Accounts Provision for Accounts Provision for Proportion Reason receivable bad debts receivable bad debts (%) Other Recovery is not 2,722,948.80 2,722,948.80 1,709,948.80 1,709,948.80 100.00 companies2 expected Total 2,722,948.80 2,722,948.80 1,709,948.80 1,709,948.80 — — 103 2) Bad debt provisions on group basis Closing Balance Aging Accounts Provision for Drawing proportion receivable bad debts (%) Within 1 year 153,250,756.63 9,890,583.27 6.45 1 to 2 years 71,084,892.44 10,935,114.90 15.38 2 to 3 years 21,276,574.60 5,611,742.31 26.38 3 to 4 years 27,683,262.15 11,105,880.37 40.12 4 to 5years 4,508,264.70 3,183,550.96 70.62 Over 5 years 4,766,998.50 4,766,998.50 100.00 Total 282,570,749.02 45,493,870.31 — (3) Bad debt provision of current period Collected/ Category Accrued Written-off Others Reason reversed Undue warranty - 3,755,144.26 - - - Unsettled receivable of revenue - 1,012,572.23 - - - recognized over time Total - 4,767,716.49 - - - 5. Finance receivable (1) Category of finance receivable Items Closing Balance Opening Balance Bank acceptance notes 303,585,218.53 58,792,792.70 Total 303,585,218.53 58,792,792.70 (2) Category of accounts receivable based on bad debt provision method Closing Balance Items Booking balance Provision Booking value Amount % Amount % Bad debt provision 303,585,218.53 100.00 - - 303,585,218.53 on group Including: bank 303,585,218.53 100.00 - - 303,585,218.53 acceptance notes Total 303,585,218.53 100.00 - - 303,585,218.53 (Continued) 104 Opening balance Items Booking balance Provision Booking value Amount % Amount % Bad debt provision 58,792,792.70 100.00 - - 58,792,792.70 on group Including: aging as characteristics of 58,792,792.70 100.00 - - 58,792,792.70 credit risk Total 58,792,792.70 100.00 - - 58,792,792.70 (3) Pledged notes receivable up to the end of year. Items Closing pledged amount Bank acceptance notes 99,078,000.87 Total 99,078,000.87 6. Other receivables Items Closing Balance Opening Balance Interest receivable - - Dividend receivable 14,495.00 14,495.00 Other receivables 41,381,728.27 51,379,979.24 Total 41,396,223.27 51,394,474.24 6.1. Dividends receivable (1) Classification Company Closing Balance Opening Balance Wuhan Steel and Electricity Co., Ltd. 14,495.00 14,495.00 Total 14,495.00 14,495.00 105 6.2. Other receivables (1) The categories of other receivable according to nature Items Closing Balance Opening Balance Receivables and payables 33,092,423.14 38,051,147.58 Security deposit 30,103,093.46 37,147,665.19 Petty cash 3,669,152.52 5,099,052.90 Others 11,397,105.01 6,088,641.82 Total 78,261,774.13 86,386,507.49 (2) Aging of other receivable Account Age Closing Balance Opening Balance Within 1 year(incl 1 year) 23,517,039.35 27,654,438.76 1-2 years 8,134,653.15 17,231,991.92 2-3 years 9,354,562.84 26,252,562.64 Over 3 years 37,255,518.79 15,247,514.17 Of which: 3-4years 24,151,505.82 7,027,188.39 4-5years 6,300,480.70 2,501,537.52 Over 5 years 6,803,532.27 5,718,788.26 Total 78,261,774.13 86,386,507.49 (3) The bad debt provision of other receivables 1st stage 2nd stage 3rd stage Expected credit Bad debt Expected credit Expected credit loss loss within the Total provision loss within 12 within the whole period whole period (no months (impairment incurred) impairment) Opening 2,334,895.21 - 32,671,633.04 35,006,528.25 balance Opening balance during — — — — the year --transfer to the - - - - 2nd stage --transfer to the -140,708.84 - 140,708.84 - 3rd stage --reverse to the - - - - 2nd stage ----reverse to - - - - 106 1st stage 2nd stage 3rd stage Expected credit Bad debt Expected credit Expected credit loss loss within the Total provision loss within 12 within the whole period whole period (no months (impairment incurred) impairment) the 1st stage Accrued 161,905.22 - 1,724,045.76 1,885,950.98 Reverse - - - - Cancelation - - - - Written off 35,686.55 - - 35,686.55 Other 23,253.18 - - 23,253.18 movement Closing 2,343,658.22 - 34,536,387.64 36,880,045.86 balance Note: When one or more of the following situations occur, it is a "significant increase in credit risk since the initial recognition" and is classified as the second stage: the account is older than 1 year and the payment is overdue for more than 30 days but not more than 90 days; The defaulting party has a negative event affecting its solvency; A significant adverse change in the value of the collateral or in the quality of the security or credit enhancement provided by a third party. When one or more of the following occurs, it is considered as a "credit impairment has occurred" and is classified as the third stage: the payment is overdue for more than 90 days; The defaulting party experiences significant financial difficulties or is likely to go bankrupt or other financial restructuring; Other situations that violate contractual agreements and indicate that there is objective evidence of impairment of financial assets. 107 (4) Provision for bad debt Change during the year Opening Closing Category Accrued Collected/ balance Written-off Others Balance reversed Bad debt 35,006,528.25 1,885,950.98 - 35,686.55 23,253.18 36,880,045.86 provision Total 35,006,528.25 1,885,950.98 - 35,686.55 23,253.18 36,880,045.86 (5) Other receivables written off in current period: none. Item Amount to be written off Other receivables written off actually 35,686.55 (6) Other receivables from the top 5 debtors based on closing balance % of Closing Closing Name Category Aging the total Balance of Balance OR Provision Within 1 Top 1 Tax refund 7,718,652.20 9.86 282,502.67 year Top 2 Deposit 2,548,847.50 3-5years 3.26 1,657,427.69 Top 3 AR/AP 2,476,894.20 2-3 years 3.16 756,691.18 4-5years Top 4 Other deposit 1,150,000.00 1.47 90,260.00 Over 5 years Top 5 Bid deposit 1,000,000.00 1-2years 1.28 36,600.00 Total — 14,894,393.90 — 19.03 2,823,481.54 7. Prepayments (1) Aging of prepayments Closing Balance Opening Balance Items Amount Percentage Amount Percentage (%) (%) Within 1 year 133,068,644.50 86.75 143,894,431.33 83.66 1 to 2 years 12,010,696.67 7.83 18,707,868.78 10.88 2 to 3 years 2,578,747.06 1.68 4,457,439.74 2.59 Over 3 years 5,730,572.25 3.74 4,931,728.27 2.87 Total 153,388,660.48 100.00 171,991,468.12 100.00 (2) Prepayments from the top 5 debtors based on closing balance The sum of top 5 of prepayment is 65,324,752.92 Yuan, represents 42.60% of closing balance of prepayment. 108 8. Inventories (1) Categories of inventories Closing Balance Item Book value Provision for decline Net book value Cost to fulfill the contract 657,703,661.17 15,425,401.03 642,278,260.14 Finished goods 524,399,789.91 47,832,216.91 476,567,573.00 Raw materials 282,868,685.78 31,011,520.30 251,857,165.48 Working in progress 211,744,888.60 10,130,805.54 201,614,083.06 Self-manufactured 35,347,357.53 - 35,347,357.53 semi-finished products Materials on consignment 21,317,653.86 60,394.18 21,257,259.68 for further processing Goods on transit 8,313,813.04 821,759.89 7,492,053.15 Properties written off debtors 2,708,646.00 1,149,186.00 1,559,460.00 Low-value consumable 166,267.10 - 166,267.10 Total 1,744,570,762.99 106,431,283.85 1,638,139,479.14 (Continued) Opening Balance Item Book value Provision for decline Net book value Cost to fulfill the contract 518,190,428.65 24,029,331.96 494,161,096.69 Finished goods 358,865,793.97 20,733,013.07 338,132,780.90 Raw materials 257,330,026.33 17,594,044.66 239,735,981.67 Working in progress 219,325,436.31 7,091,948.88 212,233,487.43 Goods on transit 64,331,292.17 463,920.35 63,867,371.82 Self-manufactured semi-finished products 30,898,915.81 - 30,898,915.81 Materials on consignment for further processing 15,134,850.12 540,289.54 14,594,560.58 Properties written off debtors 2,708,646.00 1,149,186.00 1,559,460.00 Low-value consumable 161,125.34 - 161,125.34 Total 1,466,946,514.70 71,601,734.46 1,395,344,780.24 109 (2) Provision for decline in the value of inventories Increase Decrease Opening Closing Item Others Reverse/ Others Balance Accrual Balance transferred Written- off transferred Raw 17,594,044.66 -2,603,790.07 22,790,431.86 6,769,166.15 - 31,011,520.30 materials WIP 7,091,948.88 3,038,856.66 - - - 10,130,805.54 Finished 20,733,013.07 16,562,416.248 20,518,964.39 9,982,176.79 - 47,832,216.91 goods Cost to fulfill 24,029,331.96 841,412.60 11,574,524.36 21,019,867.89 - 15,425,401.03 the contract Materials on consignment 540,289.54 -479,895.36 - - - 60,394.18 for further processing Goods on 463,920.35 287,037.52 70,802.02 - - 821,759.89 transit Properties written off 1,149,186.00 - - - - 1,149,186.00 debtors Total 71,601,734.46 17,646,037.59 54,954,722.63 37,771,210.83 - 106,431,283.85 Accrual for provision for decline in the value of inventories Basis for net realizable value Reasons for Item recognition reverse/write-off Raw materials The amount deducting the expected Sold WIP cost to product completion, selling Sold Finished goods expense and relative tax from the Sold Cost to fulfill the contract estimated selling price. Sold 9. Non-current asset due within one year Item Closing Balance Opening Balance Long term receivable due within 1 year - 15,715,631.52 Total - 15,715,631.52 10. Other current assets Item Closing Balance Opening Balance 110 Input VAT to be deducted 18,112,002.39 12,825,675.49 Contract acquisition cost 4,532,291.00 - Prepaid income tax presented at net amount 3,216,096.82 9,010,312.91 after offsetting Prepaid VAT 198,895.83 11,646,669.59 Prepaid expenses 15,056.29 16,919.61 Total 26,074,342.33 33,499,577.60 11. Long term receivable (1) Details Closing Balance Discounted Item Carrying Provision Book value rate amount Lease premium - - - - ---Unrealized financing income - - - - Goods sold by installments - - - - Total - - - - (Continued) Opening Balance Discounted Item Carrying Provision Book value rate amount Lease premium - - - - ---Unrealized financing income - - - - Goods sold by installments 5,591,380.90 428,922.00 5,162,458.90 4.75% Total 5,591,380.90 428,922.00 5,162,458.90 — 111 (2) Category of long-term receivable based on bad debt provision method Closing Balance Items Booking balance Provision Booking value Amount % Amount % Bad debt provision - - - - - on group Including: bank - - - - - acceptance notes Total - - - - - (Continued) Opening balance Items Booking balance Provision Booking value Amount % Amount % Bad debt provision 5,591,380.90 100.00 428,922.00 7.67 5,162,458.90 on group Including: aging as characteristics of 5,591,380.90 100.00 428,922.00 7.67 5,162,458.90 credit risk Total 5,591,380.90 100.00 428,922.00 7.67 5,162,458.90 112 1) The bad debt provision under expected credit loss model 1st stage 2nd stage 3rd stage Bad debt Expected credit Expected credit loss Expected credit loss Total provision loss within 12 within the whole period within the whole period months (no impairment) (impairment incurred) Opening 428,922.00 - - 428,922.00 balance Opening balance during — — — — the year --transfer to the - - - - 2nd stage --transfer to the - - - - 3rd stage --reverse to the - - - - 2nd stage ----reverse to - - - - the 1st stage Accrued - - - - Reverse 210,600.00 - - 210,600.00 Cancelation - - - - Written off - - - - Other -218,322.00 - - -218,322.00 movement Closing balance - - - - (3) Bad debt provision of long-term receivable for the year Change during the year Opening Closing Category Accrued Collected/ balance Written-off Others Balance reversed Bad debt 428,922.00 - 210,600.00 - -218,322.00 - provision Total 428,922.00 - 210,600.00 - -218,322.00 - 113 BINGSHAN REFRIGERATION & HEAT TRANSFER TECHNOLOGIES CO., LTD Notes to financial statements January 1, 2023 to December 31, 2023 (The currency is in RMB Yuan except otherwise indicated) (English translation for reference only) 12.Long-term equity investments Increase/Decrease Gains and Provision Beginning losses Adjustment of Cash bonus for Provision for Investee recognized other Change of or profits impairment Ending balance balance Increased Decreased Others impairment under the comprehensive other equity announced to of the equity income issue current method period Associates — — — — — — — — — — — Dalian Honjo Chemical Co., Ltd 9,819,096.80 - - -594,472.68 - - -1,050,000.00 - 1,717,629.40 9,892,253.52 - Keihin-Grand Ocean Thermal Technology 60,089,313.51 - - -509,338.51 - - -2,000,000.00 - - 57,579,975.00 - (Dalian)Co.,Ltd. Dalian Fuji Bingshan Vending 111,101,339.93 - - -43,490,921.84 - - - - - 67,610,418.09 - Machine Co., Ltd. MHI Bingshan Refrigeration 15,401,109.10 - - 1,142,546.44 - - - - - 16,543,655.54 - (Dalian) Co.,Ltd. Dalian Fuji Bingshan Vending Machine Sales Co., - - - - - - - - - - - Ltd Jiangsu Jingxue Insulation Technology Co.,Ltd 140,124,248.76 - - 5,840,827.15 - - -1,610,172.00 - - 144,354,903.91 - (N4) Dalian Bingshan Metal Technology 175,313,807.46 - - 31,071,464.97 - - -33,134,422.30 - - 173,250,850.13 - Co.,Ltd. 114 BINGSHAN REFRIGERATION & HEAT TRANSFER TECHNOLOGIES CO., LTD Notes to financial statements January 1, 2023 to December 31, 2023 (The currency is in RMB Yuan except otherwise indicated) (English translation for reference only) Increase/Decrease Gains and Provision Beginning losses Adjustment of Cash bonus for Provision for Investee recognized other Change of or profits impairment Ending balance balance Increased Decreased Others impairment under the comprehensive other equity announced to of the equity income issue current method period Dalian Bingshan Group Huahuida Financial Leasing 45,603,876.95 - - 1,197,707.15 - - -751,127.55 - - 46,050,456.55 - Co., Ltd Wuhan Sikafu Power Control 5,534,979.43 - - 457,455.33 - - - - - 5,992,434.76 - Equipment Co., Ltd Total 562,987,771.94 - - -4,884,731.99 - - -38,545,721.85 - 1,717,629.40 521,274,947.50 - 115 13.Other non-current financial assets Item Closing Balance Opening Balance Financial assets classified as FVTPL 164,024,771.63 149,950,861.31 Including: equity instruments 164,024,771.63 149,950,861.31 Total 164,024,771.63 149,950,861.31 14. Investment property (1) Investment property measured as cost model Property& Item Land-use-rights Total building I. Initial cost — — — 1. opening balance 230,594,490.07 26,094,438.38 256,688,928.45 2. addition 15,579,127.78 - 15,579,127.78 (1) FA\transferred from CIP 15,579,127.78 - 15,579,127.78 3. decrease - - - 4. closing balance 246,173,617.85 26,094,438.38 272,268,056.23 II. Accumulated depreciation — — — 1. opening balance 128,527,417.44 12,828,592.81 141,356,010.25 2. addition 6,800,475.72 521,888.76 7,322,364.48 (1) accrued/amortization 5,300,697.15 521,888.76 5,822,585.91 (2) FA\transferred from CIP 1,499,778.57 - 1,499,778.57 3. decrease - - - 4. closing balance 135,327,893.16 13,350,481.57 148,678,374.73 III. Impairment reserve — — — 1. opening balance - - - 2. addition - - - 3. decrease - - - 4. closing balance - - - IV. Book value — — — 1. Closing book value 110,845,724.69 12,743,956.81 123,589,681.50 2. Opening book value 102,067,072.63 13,265,845.57 115,332,918.20 (2) Investment property without ownership certificate Item Book value Reason 116 Because the land use right and the plant’s ownership belong to different person, the deed of the plant was Plant 12,141,047.62 not obtained. In 2023, the land use right is obtained, the certificate of the plant ownership is in progress The documents are not ready in full, the certificate of Rihang Apartment 1,958,830.20 the building ownership can not be dealt with 15. Fixed assets Items Closing Book Value Opening Book Value Fixed asset 1,291,851,402.46 1,229,029,368.93 Fixed asset disposal - - Total 1,291,851,402.46 1,229,029,368.93 (1) Fixed assets detail Property& Machinery Transportation Other Item equipment Total buildings equipment equipment I. Initial cost — — — — — 1.Opening 833,131,692.61 1,700,788,050.58 21,850,467.55 215,907,705.08 2,771,677,915.82 balance 2. Increase 169,961,408.00 206,761,056.32 6,124,546.45 43,911,382.93 426,758,393.70 (1) Purchase 13,060,683.47 3,476,651.96 363,268.65 4,559,341.33 21,459,945.41 (2) Transferred from 2,439,313.50 49,253,798.47 413,539.84 16,259,558.57 68,366,210.38 construction-in-pr ogress (3) Acquired from business 154,461,411.03 134,755,852.34 5,347,737.96 23,092,483.03 317,657,484.36 combination (4) financial lease - 19,274,753.55 - - 19,274,753.55 3. Decrease 18,330,807.67 46,685,982.39 1,560,741.04 11,370,982.59 77,948,513.69 (1) Disposal 2,999,204.64 46,685,982.39 1,560,741.04 11,370,982.59 62,616,910.66 (2) transferred int investment 15,331,603.03 - - - 15,331,603.03 property 4.Closing balance 984,762,292.94 1,860,863,124.51 26,414,272.96 248,448,105.42 3,120,487,795.83 II. Accumulated — — — — — depreciation 1.Opening 244,228,011.91 1,120,019,881.71 15,419,223.76 149,998,682.42 1,529,665,799.80 balance 117 Property& Machinery Transportation Other Item equipment Total buildings equipment equipment 2. Increase 101,507,446.57 198,882,895.04 4,931,531.13 30,334,072.95 335,655,945.69 (1) Accrued 24,470,757.08 91,543,120.54 1,570,559.26 12,218,112.81 129,802,549.69 (2) Acquired from 77,036,689.49 101,969,284.95 3,360,971.87 18,115,960.14 200,482,906.45 business combination (3) financial lease - 5,370,489.55 - - 5,370,489.55 3. Decrease 2,686,973.65 37,637,882.98 1,423,918.35 10,341,217.21 52,089,992.19 (1) Disposal 1,187,195.08 37,637,882.98 1,423,918.35 10,341,217.21 50,590,213.62 (2) transferred int investment 1,499,778.57 - - - 1,499,778.57 property 4.Closing balance 343,048,484.83 1,281,264,893.77 18,926,836.54 169,991,538.16 1,813,231,753.30 III. Impairment — — — — — reserve 1.Opening 201,250.96 8,839,885.62 286,519.26 3,655,091.25 12,982,747.09 balance 2. Increase 1,960,721.36 3,258,013.57 - 414,884.85 5,633,619.78 (1)Acquired from business 1,960,721.36 3,258,013.57 414,884.85 5,633,619.78 combination 3. Decrease 1,036,065.45 2,088,217.14 - 87,444.21 3,211,726.80 (1) Disposal 1,036,065.45 2,088,217.14 - 87,444.21 3,211,726.80 4.Closing balance 1,125,906.87 10,009,682.05 286,519.26 3,982,531.89 15,404,640.07 IV.Book value — — — — — 1.Closing book 640,587,901.24 569,588,548.69 7,200,917.16 74,474,035.37 1,291,851,402.46 value 2.Opening book 588,702,429.74 571,928,283.25 6,144,724.53 62,253,931.41 1,229,029,368.93 value (2) Fixed assets without ownership certificate Item Book value Reason 118 Up to December 31,2023, sum of net book value of the buildings without ownership certificate is 30,753,216.16 Yuan, they are all self-constructed buildings, which is the property Self -constructed buildings 30,753,216.16 of Sonyo Compressor (Dalian)Co., Ltd. Because the land right where the buildings stand on are not obtained, ownership certificate of the buildings are not ready. 16. Construction-in-progress Item Closing book value Opening book value Construction-in-progress 114,801,351.21 115,577,902.54 Construction materials - - Total 114,801,351.21 115,577,902.54 (1) Construction-in-progress details Closing balance Opening balance Item Book balance Provision Book Value Book balance Provision Book value Buildings & reconstruction 26,282,803.78 - 26,282,803.78 24,796,146.56 - 24,796,146.56 Improvement of machinery 83,833,793.88 - 83,833,793.88 82,341,565.62 - 82,341,565.62 Software of intelligent 4,684,753.55 - 4,684,753.55 3,575,525.17 - 3,575,525.17 manufacture Power generation - - - 9,164,665.19 4,300,000.00 4,864,665.19 project Total 114,801,351.21 - 114,801,351.21 119,877,902.54 4,300,000.00 115,577,902.54 119 (2) Change in the significant construction in progress Decrease Opening Transfer to Closing Name Increase Other balance FA/ Intangible balance decrease assets Buildings & reconstruction 24,796,146.56 2,512,958.85 3,040,744.66 247,524.75 24,020,836.00 Improvement of machinery 82,341,565.62 36,587,416.93 58,254,020.37 1,026,548.66 59,648,413.52 Software of intelligent 3,575,525.17 1,230,929.72 - 4,806,454.89 - manufacture Power generation project 9,164,665.19 - 4,864,665.19 4,300,000.00 - Total 119,877,902.54 40,331,305.50 66,159,430.22 10,380,528.30 83,669,249.52 (Continued) Percent of Including: investment Progress Accumulated accumulate Interest Source of Name Budget against of capitalized d capitalized capitalization funds budget construction interest interest of Rate (%) (%) the year Buildings & Self- 29,847,212.07 80.48 80.48 - - - reconstruction financing Improvement Self- 62,164,977.27 95.95 95.95 - - - of machinery financing Software of intelligent 3,610,000.00 - - - - - — manufacture Power generation 9,164,665.19 - - - - - — project Total 104,786,854.53 — — — — — — (3) Impairment provision Opening Closing Item Increase Decrease Reason balance balance Power generation 4,300,000.00 - 4,300,000.00 - — project Total 4,300,000.00 - 4,300,000.00 - — 120 17. Right-of-use assets Property/ Transportation Electronic Item Machinery Land use right Total buildings equipment equipment I. Initial cost — — — — — — 1.Opening balance 12,258,253.25 22,042,380.89 334,540.86 194,322.58 7,945,762.91 42,775,260.49 2. Increase 17,260,086.14 - - 802,669.35 7,579,035.02 25,641,790.51 (1) lease in 17,260,086.14 - - 802,669.35 - 18,062,755.49 (2) business combination - - - - 7,579,035.02 7,579,035.02 3. Decrease 7,217,240.70 20,541,973.76 334,540.86 - 121,248.96 28,215,004.28 (1) Disposal 7,217,240.70 1,267,220.21 334,540.86 - 121,248.96 8,940,250.73 (2) transferred into FA - 19,274,753.55 - - - 19,274,753.55 4.Closing balance 22,301,098.69 1,500,407.13 - 996,991.93 15,403,548.97 40,202,046.72 II. Accumulated — — — — — — amortization 1.Opening balance 2,561,983.47 7,244,798.14 223,027.24 99,228.48 1,704,560.90 11,833,598.23 2. Increase 8,604,790.32 1,263,779.95 111,513.60 62,992.06 2,139,878.33 12,182,954.26 (1) Accrued 8,604,790.32 1,263,779.95 111,513.60 62,992.06 1,297,763.28 11,340,839.21 (2) business combination - - - - 842,115.05 842,115.05 3. Decrease 6,076,357.87 7,870,831.42 334,540.84 - 80,832.72 14,362,562.85 (1) Disposal 6,076,357.87 1,188,837.41 334,540.84 - 80,832.72 7,680,568.84 (2) transferred into FA - 6,681,994.01 - - - 6,681,994.01 4.Closing balance 5,090,415.92 637,746.67 - 162,220.54 3,763,606.51 9,653,989.64 121 Property/ Transportation Electronic Item Machinery Land use right Total buildings equipment equipment III. Impairment reserve — — — — — — 1. Opening balance - - - - - - 2. Increase - - - - - - 3. Decrease - - - - - - 4.Closing balance - - - - - - IV. Book value — — — — — — 1. Closing book value 17,210,682.77 862,660.46 - 834,771.39 11,639,942.46 30,548,057.08 2. Opening book value 9,696,269.78 14,797,582.75 111,513.62 95,094.10 6,241,202.01 30,941,662.26 122 18. Intangible assets Non- Item Land use right Patent Others Total Patent I. Initial cost — — — — — 1.Opening balance 173,151,420.72 17,630,188.82 5,773,680.00 59,376,795.82 255,932,085.36 2. Increase 67,754,316.68 - - 17,330,846.32 85,085,163.00 (1) Purchase 15,106,584.15 - - 4,347,395.91 19,453,980.06 (2) Transferred from - - - 278,761.06 278,761.06 construction-in-progress (3) increase via merge 52,647,732.53 - - 12,704,689.35 65,352,421.88 3. Decrease - - - 2,458,296.66 2,458,296.66 (1) Disposal - - - 2,458,296.66 2,458,296.66 4.Closing balance 240,905,737.40 17,630,188.82 5,773,680.00 74,249,345.48 338,558,951.70 II. Accumulated — — — — — amortization 1.Opening balance 47,596,987.88 9,040,676.05 4,273,700.00 26,944,001.36 87,855,365.29 2. Increase 24,304,389.58 1,429,512.20 500,008.00 15,889,731.72 42,123,641.50 (1) Accrued 6,448,992.14 1,429,512.20 500,008.00 5,192,180.77 13,570,693.11 (2) Increase from merger 17,855,397.44 - - 10,697,550.95 28,552,948.39 3. Decrease - - - 1,986,197.48 1,986,197.48 (1) Disposal - - - 1,986,197.48 1,986,197.48 4.Closing balance 71,901,377.46 10,470,188.25 4,773,708.00 40,847,535.60 127,992,809.31 III. Impairment — — — — — provision 1. Opening balance - - - - - 2. Increase - - - 50,980.35 50,980.35 (1) Increase from merger - - - 50,980.35 50,980.35 3. Decrease - - - 38,999.18 38,999.18 (1) Disposal - - - 38,999.18 38,999.18 4.Closing balance - - - 11,981.17 11,981.17 IV. Book value — — — — — 1. Closing book value 169,004,359.94 7,160,000.57 999,972.00 33,389,828.71 210,554,161.22 2. Opening book value 125,554,432.84 8,589,512.77 1,499,980.00 32,432,794.46 168,076,720.07 19. Goodwill (1) Original cost of goodwill 123 Increased during Decreased during current year current year Opening Name Enterprises Closing Balance Balance merger Other Disposal Other increase Sonyo Compressor (Dalian)Co., Ltd 240,922,872.80 - - - - 240,922,872.80 Sonyo Refrigeration (Dalian) Co., Ltd.(N1) - 38,056,663.52 - - - 38,056,663.52 Sonyo Refrigeration System (Dalian) Co., 5,671,836.12 - - - - 5,671,836.12 Ltd. Dalian Universe Thermal Technology 1,440,347.92 - - - - 1,440,347.92 Co., Ltd. Dalian Bingshan Group Engineering 310,451.57 - - - - 310,451.57 Co., Ltd Total 248,345,508.41 38,056,663.52 - - - 286,402,171.93 (2) Goodwill impairment provision In the year 2015, the book value of equity investment of Dalian Universe Thermal Technology Co., Ltd exceeds the fair value of the proportion of the acquired company’s identifiable net asset. The difference between the book value of equity investment of 48, 287,589.78 Yuan and the identifiable net asset’s fair value of Dalian Sanyo High-efficient Refrigeration System Co., Ltd of 46,847,241.86 Yuan on the acquisition date of July 31st ,2015 is recognized as goodwill of 1,440,347.92 Yuan on The Company consolidated financial report at the end of the year. In the year 2016, Dalian Bingshan Group Engineering Co., Ltd purchases shares of Dalian Bingshan Baoan Leisure Industry Co., Ltd and gains control. The transferred price is based on the net asset of Dalian BingshanBaoan Leisure Industry Co., Ltd on June 30th, 2016. Negotiated with Dalian Bingshan Baoan Leisure Industry Co., Ltd’s shareholder Baoan Water Project (China) Limited Company, the transfer price is the combination cost on the purchasing date which is 5,359,548.42 Yuan, the fair value of proportion of Dalian BingshanBaoan Leisure Industry Company’s identifiable net asset is 5,049,096.85 Yuan on the purchasing day, therefore, goodwill is 310,451.57Yuan on the purchasing date. Dalian Bingshan Group Engineering Co., Ltd absorbed Dalian Bingshan Baoan Leisure Industry Co., Ltd in 2019. In 2022, the Company purchased 60% of the shareholdings of Sonyo Compressor (Dalian)Co., Ltd from Sanyo Electric (China)Co., Ltd, and negotiated with Sanyo Electric (China)Co., Ltd to determine the share transfer consideration of 929,148,000.00 Yuan. After the transaction, Sonyo Compressor (Dalian)Co., Ltd became a subsidiary. This transaction is a business combination not under same control, cost of combination is the FV of previous shareholdings on acquisition date plus 60% shareholdings acquisition consideration, which is 1,548,580,000Yuan in total. Goodwill of 240,922,872.80 Yuan is recognized for the difference between the share of FV of net identifiable asset of acquiree, 1,307,657,127.20Yuan and cost of combination on acquisition date. 124 In 2022, the Company purchased 30% of the shareholdings of Sonyo Refrigeration System (Dalian) Co., Ltd. from Panasonic Corporation of china Co., LTD and 25% shareholdings of Sonyo Refrigeration System (Dalian) Co., Ltd from Panasonic Appliances cold Chain (Dalian)Co.Ltd. The negotiated share transfer consideration of 81,735,060.00 Yuan. After the transaction, Sonyo Compressor (Dalian)Co., Ltd became a subsidiary. This transaction is a business combination not under same control, cost of combination is the FV of previous shareholdings on acquisition date plus 55% shareholdings acquisition consideration, which is 111,456,900.00Yuan in total. Goodwill of 5,671,836.12 Yuan is recognized for the difference between the share of FV of net identifiable asset of acquire, 105,785,063.87Yuan and cost of combination on acquisition date. In 2023, the Company purchased 40% of the shareholdings of Sonyo Refrigeration (Dalian) Co., Ltd. from Panasonic Corporation of China Co., LTD and 60% shareholdings of Sonyo Refrigeration (Dalian) Co., Ltd from Sanyo Electric (China)Co., Ltd. This transaction is a business combination not under same control, cost of combination is the consideration of 145,285,500.00 Yuan for share transfer. Goodwill of 38,056,663.52Yuan is recognized for the difference between the share of FV of net identifiable asset of acquire. 107,228,836.48Yuan and cost of combination on acquisition date. The book value of goodwill from business combination shall be allocated into the relevant asset group using the reasonable method since acquisition date, and be tested for impairment on related asset groups containing goodwill by professional appraisal companies or use evaluation models to predict the recoverable amount of related asset groups containing goodwill in accordance with the present value of future cash flows including gross profit rate, sales growth rate (1%-8%), discount rate(10.74%-11.62%) and other parameters in the next 5 years. No goodwill impairment has been found when the recoverable amount of asset group for testing is higher than its book value. 125 20. Long-term unamortized expense Opening Other Closing Item Increase Amortization Balance Decrease balance Greenland of new factory 3,940,176.58 - 892,115.52 - 3,048,061.06 Employee’s dormitory use 1,596,735.42 - 138,478.32 - 1,458,257.10 right Membership fee for golf 390,500.00 - 16,500.00 - 374,000.00 Renovation and rebuilding 339,641.30 - 197,549.97 - 142,091.33 Amortization of instruments 219,513.62 389,380.61 293,657.62 - 315,236.61 Technology entrance fee of - 16,016.35 7,340.85 - 8,675.50 cold and heat machinery Total 6,486,566.92 405,396.96 1,545,642.28 - 5,346,321.60 21. Deferred tax assets and deferred tax liabilities (1) Deferred tax assets without offsetting Closing balance Opening balance Item Deductible Deferred tax Deductible Deferred tax assets temporary difference assets temporary difference Provision for credit impairment 445,951,688.75 81,048,834.24 383,685,092.04 70,892,192.53 Provision for impairment of 153,519,850.70 23,185,410.37 110,205,587.05 18,013,430.31 assets Lease liability 52,799,814.74 8,006,670.79 18,901,886.18 2,883,573.82 FA depreciation 48,341,817.47 7,251,272.60 35,600,567.62 5,340,085.14 Accrued sales discount 17,125,319.07 2,568,797.86 13,744,913.65 2,061,737.05 Unrealized profit from internal 13,034,503.47 1,955,175.52 13,034,503.47 1,955,175.52 transaction Unrealized revenue 11,170,890.18 2,792,722.55 - - Provision 4,544,802.83 714,830.47 16,786,967.43 2,518,045.11 Safety cost 449,375.00 67,406.25 - - Deductible loss - - 9,991,507.80 1,498,726.17 Others 1,138,175.07 170,726.26 845,210.65 126,781.60 Total 748,076,237.28 127,761,846.91 602,796,235.89 105,289,747.25 126 (2) Deferred tax liabilities without offsetting Closing balance Opening balance Item Taxable Taxable Deferred tax Deferred tax temporary temporary liabilities liabilities difference difference Revaluation increase in business combination asst not under same 253,978,835.91 38,096,825.39 211,352,103.77 31,702,815.57 control Change on FV of other non-current financial 151,430,911.13 22,714,636.67 137,357,000.73 20,603,550.11 assets FA depreciation 44,655,750.06 6,698,362.51 46,545,245.48 6,981,786.82 Use right of asset 48,864,566.94 7,414,624.88 19,380,755.68 2,961,740.42 Total 498,930,064.04 74,924,449.45 414,635,105.66 62,249,892.92 (3) Net deferred tax asset or liability Offset Offset amount at Closing balance of amount at the Opening balance of Item the year-end net of DTA/DTL beginning of net of DTA/DTL the year Deferred tax 14,112,987.38 113,648,859.53 9,865,360.64 95,424,386.61 assets Deferred tax 14,112,987.38 60,811,462.07 9,865,360.64 52,384,532.28 liabilities (4) Unrecognized deferred tax assets details Item Closing balance Opening balance Deductible temporary difference 227,656,543.59 173,990,137.06 Deductible loss 553,968,553.34 310,513,803.17 Total 781,625,096.93 484,503,940.23 127 (5) Unrecognized deductible loss of deferred tax assets expired years Year Closing balance Opening balance Notes 2024 7,735,166.14 7,735,166.14 — 2025 8,950,922.50 8,950,922.50 — 2026 54,629,003.37 54,629,003.37 — 2027 67,364,986.52 67,240,033.97 — 2028 55,969,301.70 13,111,421.07 — 2029 39,791,411.14 45,365,135.77 — 2030 7,689,545.97 10,574,799.57 — 2031 126,221,649.87 50,864,213.30 — 2032 44,819,905.64 52,043,107.48 — 2033 140,796,660.49 - — Total 553,968,553.34 310,513,803.17 — 22. Other non-current asset Closing Balance Opening balance Category Carrying Book Carrying Book value Provision Provision amount value amount Debt offset 21,770,721.00 1,527,371.56 20,243,349.44 - - - housing Total 21,770,721.00 1,527,371.56 20,243,349.44 - - - 23. Assets with restricted ownership or use rights Item At the year end Book value Carrying amount Type Restriction Guarantee Monetary fund 110,277,531.37 110,277,531.37 Frozen deposit/ frozen bank account Notes receivable 4,939,655.20 4,939,655.20 Pledged Pledged Financing of receivable 99,078,000.87 99,078,000.87 Pledged Pledged FA 89,720,897.99 60,540,912.88 Pledged Pledged Intangible asset 8,266,573.44 5,421,865.27 Pledged Pledged Investment property 38,955,728.90 32,097,825.31 Pledged Pledged Total 351,238,387.77 312,355,790.90 — — (continued) 128 Item At the beginning of the year Book value Carrying amount Type Restriction Guarantee Monetary fund 84,504,096.01 84,504,096.01 Frozen deposit/ frozen bank account Notes receivable 98,917,384.72 98,917,384.72 Pledged Pledged Financing of receivable 15,259,393.79 15,259,393.79 Pledged Pledged FA 89,669,668.86 62,207,555.51 Pledged Pledged Intangible asset 8,266,573.44 5,587,198.75 Pledged Pledged Investment property 38,955,728.90 32,981,247.79 Pledged Pledged Total 335,572,845.72 299,456,876.57 — — Note: DALIAN BRANKA TECHNOLOGY CO., LTD prosecuted our company, therefore 4,317,629.58Yuan is frozen. But subsequently the adjudication is made. Xuchang Superlift Energy Saving Technology Co., LTD prosecuted Dalian Bingshan Group Engineering Co., Ltd, therefore 14,435,825.75 Yuan is frozen. But subsequently both parties reach an accommodation, the frozen is over. Xining Changfeng Group Trade Co. Ltd prosecuted Dalian Bingshan Group Engineering Co., Ltd, therefore 2,168,000.00 Yuan is frozen. Dalian Bingshan Guardian Automation Co., Ltd.’s account is frozen with 439,215.89 Yuan, and Sonyo Refrigeration (Dalian) Co., Ltd.’s account is frozen with215,000.00 Yuan because of litigation. The Company’s subsidiary, Dalian Universe Thermal Technology Co., Ltd pledged the bank acceptance note to the bank as guarantee for issuing the bank acceptance note. The Company’s subsidiary, Dalian Bingshan Engineering & Trading Co., Ltd pledged the bank acceptance note to the bank as guarantee for issuing the bank acceptance note. The Company’s subsidiary, Sonyo Compressor (Dalian)Co., Ltd pledged the bank acceptance note to the bank as guarantee for issuing the bank acceptance note. The Company’s subsidiary, Sonyo Refrigeration (Dalian) Co., Ltd pledged the bank acceptance note to the bank as guarantee for issuing the bank acceptance note. The Company’s subsidiary, Wuhan New World Refrigeration Industry Co., LTD., mortgaged its fixed assets, intangible assets and the investment property to the bank, as an integrated limit of credit used for acceptance, letter of credit, letter of guarantee, factoring, other specific credit business. 129 24. Short-term borrowing (1) Category of short-term borrowing Loan category Closing balance Opening balance Credit loan 256,686,746.70 262,016,713.87 Factoring loan 2,976,345.47 - Pledged loan 2,624,692.21 12,036,276.28 Total 262,287,784.38 274,052,990.15 25. Notes payable Notes Category Closing balance Opening balance Bank acceptance notes 670,720,999.48 616,424,384.85 Commercial acceptance notes - 2,520,000.00 Total 670,720,999.48 618,944,384.85 26. Accounts payable Item Closing balance Opening balance Material payments 931,983,444.51 956,122,327.00 Project payments 675,076,736.92 567,873,401.74 Equipment payments 43,234,911.60 55,406,593.91 Others 5,540,269.98 6,695,737.94 Total 1,655,835,363.01 1,586,098,060.59 27. Other accounts payable Item Closing balance Opening balance Interest payable - - Dividend payable 533,156.00 533,156.00 Other accounts payable 278,270,996.17 66,521,094.25 Total 278,804,152.17 67,054,250.25 27.1 Dividend payable Item Closing balance Opening balance Ordinary share dividend 533,156.00 533,156.00 Total 533,156.00 533,156.00 130 27.2 Other accounts payable (1) Other payables categorized by payments nature Payments nature Closing balance Opening balance Supplier platform 179,737,197.47 - Apply for reimbursement and unpaid 24,617,613.80 21,409,586.91 Payable factoring 22,407,941.90 - Cash pledge and security deposit 14,448,796.02 11,393,395.62 Agency fees 5,317,884.69 - Repair 4,676,404.47 - Trade mark and royalty 2,531,401.13 3,505,028.04 Receipts under custody 830,631.83 700,531.82 Others 23,703,124.86 29,512,551.86 Total 278,270,996.17 66,521,094.25 28. Contract liability (1) Contract liability Item Closing balance Opening balance Received in advance due from unrealized revenue 787,685,294.53 647,645,820.57 Total 787,685,294.53 647,645,820.57 (2) Contract liability over 1 year Item Closing balance Unsettled reason Company 2 23,690,469.49 Not complete yet Total 23,690,469.49 — (3) Change of book value of the contract liability Item Change amount Change reason Combination Received in advance due from unrealized revenue 146,750,000.38 Scope change Total 146,750,000.38 — 131 29. Employee’s payable (1) Category of employee’s payable Opening Item Increase Decrease Closing balance balance Short-term employee’s 118,200,459.60 698,112,149.00 666,960,098.49 149,352,510.11 payable Post-employment benefit –defined contribution 16,223.63 67,338,512.94 67,343,533.22 11,203.35 plan Termination benefits - 2,643,680.07 2,510,280.07 133,400.00 Other welfare due within 1 year - - - - Total 118,216,683.23 768,094,342.01 736,813,911.78 149,497,113.46 (2) Short-term employee’s payables Opening Item Increase Decrease Closing balance balance Salaries, bonus, 103,351,245.84 566,724,928.58 533,844,717.12 136,231,457.30 allowance, and subsidy Welfare - 29,570,037.23 29,570,037.23 - Social insurance 9,001.71 40,370,113.39 40,372,189.41 6,925.69 Include: Medical 7,733.56 32,334,416.06 32,335,495.51 6,654.11 insurance Supplemental - 37,988.21 37,988.21 - insurance On-duty injury 1,268.15 4,158,076.12 4,159,072.69 271.58 insurance Maternity insurance - 3,839,633.00 3,839,633.00 - Housing funds - 46,650,075.94 46,471,919.96 178,155.98 Labor union and training 3,426,187.27 11,176,647.07 10,594,153.94 4,008,680.40 expenses Short-term leave with pay - - - - Reward bonus and welfare 11,414,024.78 3,620,346.79 6,107,080.83 8,927,290.74 fund Total 118,200,459.60 698,112,149.00 666,960,098.49 149,352,510.11 (3) Defined contribution plan 132 Opening Item Increase Decrease Closing balance balance Pension 12,626.24 65,219,039.12 65,220,801.52 10,863.84 Unemployment 3,597.39 2,119,473.82 2,122,731.70 339.51 insurance Company annuity plan - - - - Total 16,223.63 67,338,512.94 67,343,533.22 11,203.35 30. Tax payable Item Closing balance Opening balance Enterprise income tax 10,958,503.00 3,541,171.62 Value-added tax 5,013,411.92 23,058,922.64 Real estate tax 2,589,711.66 2,212,510.37 Land use tax 1,313,078.49 1,122,457.62 Stamp duty 879,269.28 787,688.77 City maintenance and construction tax 551,839.60 1,253,818.83 Individual income tax 514,426.82 818,322.16 Education surcharge 394,171.13 895,584.93 River toll fee 2,080.36 1,046.68 Total 22,216,492.26 33,691,523.62 31. Non-current liabilities due within one year Item Closing balance Opening balance Bond payable due within one year 119,400,000.00 24,900,000.00 Long-term payable due within one year 24,636,926.13 29,809,686.93 Lease obligation due within one year 6,608,421.51 8,396,267.63 Total 150,645,347.64 63,105,954.56 32. Other current liabilities Item Closing balance Opening balance Notes payable endorsed not 148,957,983.15 127,165,397.88 derecognized Output Vat to be carried forward 54,357,881.28 77,484,605.36 Total 203,315,864.43 204,650,003.24 33. Long-term borrowing (1) Category of long-term borrowing Category Closing Balance Opening Balance 133 Pledged loan 609,700,000.00 585,100,000.00 Guarantee loan 70,000,000.00 130,000,000.00 Total 679,700,000.00 715,100,000.00 Note 1: Pledged loan of 0.6 billion Yuan is for business combination in 2022, which comprises 0.3 billion Yuan from Dalian Zhoushuizi Branch of China Construction Bank Corporation, 5years with 2.75% borrowing rate. 50% shareholdings of Sonyo Compressor (Dalian)Co., Ltd and 37.5% shareholdings of Sonyo Refrigeration System (Dalian) Co., Ltd. were pledged. China Construction Bank Corporation will complete the guarantee in February 2023. 0.3 billion Yuan from Dalian Branch of Bank of Communications Co., Ltd., 7 years with 2.75% borrowing rate. 50% shareholdings of Sonyo Compressor (Dalian)Co., Ltd and 37.5% shareholdings of Sonyo Refrigeration System (Dalian) Co., Ltd. were pledged. Dalian Branch of Bank of Communications Co., Ltd will complete the guarantee in February 2023. In 2024, 40 million Yuan loan is planned to pay back to Construction bank and 1.44 million Yuan loan to Communications bank. Note 2: Pledged loan includes a new loan of 87 million Yuan in 2023 for acquisition of Sonyo Refrigeration System (Dalian) Co., Ltd. held by Panasonic Corporation of China Co., LTD and Sanyo Electric (China)Co., Ltd. The loan is expired by 7 years with 2.75% borrowing rate. Up to December 31, 2023, the closing balance is 79million Yuan and will be repaid 5 million Yuan in 2024. Note 3: In year 2016, the Development Fund from China Development Bank gave support to the Company’s intelligent and green equipment of cold chain and service industry base project and provided special fund to the Company’s holding shareholder, Bingshan Group. The fund is160 million Yuan with 10year’s expiration at 1.2% rate. Once the fund arrived, Bingshan Group gave it to the Company at the same rate of 1.2% in lump sum. The above fund needed to be warranted by the Company. The guarantee seems to be given for the holding shareholder, but it is for the Company itself in fact. Up to December 31, 2023, the closing balance is 130 million Yuan and will be repaid 60 million Yuan in 2024. 134 34. Lease obligation (1) Details of lease obligation Category Closing balance Opening balance Lease payment 38,276,477.18 23,357,885.20 Less: unrecognized finance expense 7,533,068.70 3,731,085.52 Non-current liability due within 1 year 6,608,421.51 8,396,267.63 Net lease liability 24,134,986.97 11,230,532.05 35. Long term accounts payable Item Closing Balance Opening Balance Long term accounts payable 10,331,937.30 31,009,644.16 Special fund payable - - Total 10,331,937.30 31,009,644.16 35.1Category by nature Nature Closing Balance Opening Balance Financial lease borrowings 10,331,937.30 31,009,644.16 Total 10,331,937.30 31,009,644.16 36. Provision Nature Closing Balance Opening Balance Reason Warranty 4,544,802.88 3,094,982.15 Service after sales Open litigation - 15,710,985.28 — Total 4,544,802.88 18,805,967.43 — 37. Deferred income (1) Category of deferred income Item Opening Balance Increase Decrease Closing Balance Government subsidy 99,754,346.39 10,522,129.73 12,002,208.32 98,274,267.80 Total 99,754,346.39 10,522,129.73 12,002,208.32 98,274,267.80 135 (2) Government subsidy Into non- The value offset Related Opening Into other Closing Government subsidy item Increase operating cost and expense Others with asset/ Balance income Balance income this year income Contribution to subsidiary Asset 37,876,000.00 - - 1,114,000.00 - - 36,762,000.00 company relocation related Application of NH3 and CO2 instead of R22 screw Asset 20,506,438.28 - - 1,932,952.12 - - 18,573,486.16 refrigerating machine combined Related condensing unit Asset Eco Compressor project 17,421,621.34 - - 2,553,850.15 - - 14,867,771.19 / Income related R290 replacement of R22 large Asset 13,006,663.20 3,251,665.80 - - - - 16,258,329.00 industrial screw unit related R290 replacement of R22 Asset industrial double stage screw 4,747,680.00 1,186,920.00 - - - - 5,934,600.00 related unit Asset Compressor IC system 3,169,590.55 - - 368,769.72 - - 2,800,820.83 related Ultrasonic intelligent defrost Asset 3,006,353.02 - - 414,824.40 - - 2,591,528.62 technology related Asset Refrigeration testing APP 20,000.00 - - 20,000.00 - - - related 136 Into non- The value offset Related Opening Into other Closing Government subsidy item Increase operating cost and expense Others with asset/ Balance income Balance income this year income 2023 AI Innovation Development Plan Fund- Income Government subsidy of - 3,000,000.00 - 3,000,000.00 - - - related Liaoning Provincial Department of Science and Technology - Income Brand establishment expenses - 947,718.00 - 947,718.00 - - - related Meat storage technology and Income - 487,400.00 - 1,668.00 - - 485,732.00 equipment related Income Digital platform construction - 440,000.00 - 440,000.00 - - - related FY2020 Subsidy for key science and technology research and Income - 418,500.00 - 418,500.00 - - - development by Dalian Science related and Technology Bureau Study on heat transfer performance of red water heat Income - 220,000.00 - 220,000.00 - - - exchanger and replacement of related heat exchange tube 137 Into non- The value offset Related Opening Into other Closing Government subsidy item Increase operating cost and expense Others with asset/ Balance income Balance income this year income Income Special funds for innovation - 180,000.00 - 180,000.00 - - - related FY2023 subsidy by Bureau of Income - 115,500.00 - 115,500.00 - - - Science and Technology related Income Loan discount - 65,833.33 - 65,833.33 - - - related FY2022 Science and Income - 50,000.00 - 50,000.00 - - - Technology Awards related Income Demonstration subsidy - 50,000.00 - 50,000.00 - - - related Dalian Employment and Talent Service Center government Income - 28,816.00 - 28,816.00 - - - subsidy - unemployment related insurance expansion subsidy 138 Into non- The value offset Related Opening Into other Closing Government subsidy item Increase operating cost and expense Others with asset/ Balance income Balance income this year income FY2022 Dalian scientific and technological achievements Income - 38,000.00 - 38,000.00 - - - transfer and transformation related subsidy and award project Subsidies for the training of Income - 18,360.00 - 18,360.00 - - - highly skilled personnel related Subsidies for college graduates Income - 15,056.60 - 15,056.60 - - - and social security subsidies related Subsidy for employment of graduates by Dalian Jinpu New Income - 6,000.00 - 6,000.00 - - - Area employment and talent related service center Income Subsidy for labor training - 2,360.00 - 2,360.00 - - - related Total 99,754,346.39 10,522,129.73 - 12,002,208.32 - - 98,274,267.80 — Note: Asset related grant shall be offset the cost or expense within the asset’s useful life; income related grant shall be booked into other income or offset cost or expense if it is relevant to daily activity, otherwise it shall be booked into non-operating income. 139 38.Share capital Increase/decrease(+/-) Opening New Transfer Item Share Closing balance balance share from capital others Subtotal dividend issued reserve Total share 843,212,507.00 - - - - - 843,212,507.00 capital 39.Capital reserves Opening Items Increase Decrease Closing Balance Balance Share premium 669,193,413.27 - - 669,193,413.27 Other capital reserves 47,903,685.11 - - 47,903,685.11 Total 717,097,098.38 - - 717,097,098.38 140 BINGSHAN REFRIGERATION & HEAT TRANSFER TECHNOLOGIES CO., LTD Notes to financial statements January 1, 2023 to December 31, 2023 (The currency is in RMB Yuan except otherwise indicated) (English translation for reference only) 40.Other comprehensive income Current year Opening Items Amount for the Less:Previously recognized Less: After-tax After-tax attribute Closing Balance Balance period before in profit or loss into other income attribute to the to minority income tax comprehensive income tax parent company shareholder I.Later can’t reclassified into profit and loss of other - - - - - - - comprehensive income II. Later reclassified into profit and loss of other 2,208,669.73 - - - - - 2,208,669.73 comprehensive income Other comprehensive income that can be transferred to profit 2,208,669.73 - - - - - 2,208,669.73 or loss under the equity method Other comprehensive income total 2,208,669.73 - - - - - 2,208,669.73 141 41. Special reserve Item Opening Balance Increase Decrease Closing Balance Manufacturing safety - 13,214,150.71 12,764,775.75 449,374.96 Total - 13,214,150.71 12,764,775.75 449,374.96 42.Surplus reserves Item Opening Closing Increase Decrease Balance Balance Statutory surplus reserve 362,972,224.98 10,426,530.94 - 373,398,755.92 Discretionary surplus reserve 462,249,814.41 31,510,869.01 - 493,760,683.42 Total 825,222,039.39 41,937,399.95 - 867,159,439.34 Note: The Company made profit distribution during the reporting period. According to the resolution of the 2022 annual General meeting of shareholders, the discretionary surplus reserve of RMB 31,510,869.01 will be appropriated based on 20% of the net profit of the statutory financial report for FY2022; Statutory surplus reserve of 10,426,530.94 Yuan shall be appropriated based on 10% of the net profit of the parent company this year. 142 43.Undistributed profits Item Current year Last year Closing balance of last year 618,445,922.58 627,764,582.32 Add: Adjustments to the opening balance of -65,810.05 -539,927.37 undistributed profits Including: additional retrospective adjustments - - according to the new accounting standards Change on accounting policy -65,810.05 -539,927.37 Correction of prior period significant errors - - Change on combination scope under same - - control Other factors - - Opening balance of current year 618,380,112.53 627,224,654.95 Add: net profit attributable to shareholders of 49,375,900.83 18,255,330.45 parent company in the year Less: Provision for statutory surplus reserves 10,426,530.94 15,755,434.51 Provision for any surplus reserves 31,510,869.01 - Provision of general risk - - Dividends payable for common shares 8,432,125.07 8,432,125.07 Common stock dividends converted to equity - - Others - 3,386,430.61 Closing balance of current year 617,386,488.34 618,380,112.53 143 44.Operating revenue and cost (1) Details Items Current year Last year Sales revenue Cost of sales Sales revenue Cost of sales Revenue from principle operation 4,708,789,817.06 3,931,870,621.80 2,803,347,359.37 2,459,913,203.46 Revenue from other operation 107,151,650.64 73,726,836.39 89,737,950.92 77,615,637.94 Total 4,815,941,467.70 4,005,597,458.19 2,893,085,310.29 2,537,528,841.40 (2) Main revenue and COS details Northeast China Central China Total Contract classification Sales revenue Cost of sales Sales revenue Cost of sales Sales revenue Cost of sales Classified by products 4,613,126,067.20 3,833,847,926.43 202,815,400.50 171,749,531.76 4,815,941,467.70 4,005,597,458.19 Manufacture products 3,212,707,591.48 2,562,240,496.51 144,731,244.58 128,025,645.17 3,357,438,836.06 2,690,266,141.68 Project installation 1,270,182,363.19 1,173,033,479.16 24,480,978.58 22,576,643.32 1,294,663,341.77 1,195,610,122.48 Other products and service 130,236,112.53 98,573,950.76 33,603,177.34 21,147,243.27 163,839,289.87 119,721,194.03 Classified by geography location 4,613,126,067.20 3,833,847,926.43 202,815,400.50 171,749,531.76 4,815,941,467.70 4,005,597,458.19 domestic 4,075,399,244.72 3,437,323,354.01 202,815,400.50 171,749,531.76 4,278,214,645.22 3,609,072,885.77 overseas 537,726,822.48 396,524,572.42 - - 537,726,822.48 396,524,572.42 Timing of goods transferred 4,613,126,067.20 3,833,847,926.43 202,815,400.50 171,749,531.76 4,815,941,467.70 4,005,597,458.19 At a point 4,514,583,069.37 3,736,525,341.06 202,815,400.50 171,749,531.76 4,717,398,469.87 3,908,274,872.82 Over the time 98,542,997.83 97,322,585.37 - - 98,542,997.83 97,322,585.37 Total 4,613,126,067.20 3,833,847,926.43 202,815,400.50 171,749,531.76 4,815,941,467.70 4,005,597,458.19 144 45.Taxes and surcharges Items Current year Last year Property tax 10,073,731.86 8,149,841.00 City construction tax 9,012,910.60 3,787,453.40 Education surcharge 6,439,924.63 2,716,374.19 Land use tax 5,015,774.62 4,339,092.94 Stamp duty 3,354,441.63 3,036,523.34 Vehicle and vessel tax 48,250.80 21,640.80 Others 23,642.94 10,700.69 Total 33,968,677.08 22,061,626.36 46.Selling expenses Items Current year Last year Employee benefit 141,519,344.86 94,640,905.30 Travel expense 25,719,851.30 12,871,992.12 Official business expense 25,483,586.78 15,487,688.84 Maintenance and repair expense 17,803,113.38 17,886,776.97 Business entertaining expense 15,227,636.78 9,081,381.79 Advertisement and bids expense 4,936,902.38 1,817,387.69 Depreciation expense 2,257,182.91 861,025.06 Other expense 914,408.09 1,088,557.19 Total 233,862,026.48 153,735,714.96 145 47. Administrative expenses Items Current year Last year Employee benefit 127,272,720.89 104,233,517.24 Official expense 28,493,919.83 19,600,747.44 Depreciation expense 25,264,201.98 17,450,109.34 Maintenance and repair expense 16,475,833.99 8,558,115.62 Long-term assets amortization 11,646,085.10 7,988,593.35 Patent trade mark use 9,372,566.10 1,139,572.89 Design consultant and test service expense 8,075,373.29 14,255,471.99 Travel expense 6,514,713.45 4,544,965.76 Other taxes and fee 3,686,510.53 841,243.95 Safety production cost 3,062,462.68 2,791,153.21 Business entertaining expense 2,738,569.12 1,664,993.09 Insurance expense 1,435,356.69 830,189.74 Advertisement expense 814,999.22 424,668.21 Transportation expense 47,368.09 204,637.83 Other expense 5,667,564.54 1,850,224.84 Total 250,568,245.50 186,378,204.50 48.Technology development expense Items Current year Last year Employee benefit 102,598,481.06 52,660,638.70 Raw material 20,934,040.54 12,253,575.39 Depreciation and amortization expense 14,685,194.95 6,409,516.10 Other expense 25,968,001.16 5,469,075.50 Total 164,185,717.71 76,792,805.69 49.Financial expenses Items Current year Last year Interest expenses 37,918,133.57 18,581,726.78 Less: interest income 10,558,433.14 5,850,062.80 Add: exchange loss -299,066.17 -3,698,043.31 Add: others expenditure 3,097,443.21 2,791,902.36 Total 30,158,077.47 11,825,523.03 146 50.Other income Items Current year Last year Input VAT accelerated deduction 17,504,090.47 - Government subsidy 12,002,208.32 6,473,525.00 Insurance premium refund 367,800.00 - Personal income tax handling fee refund 180,238.52 90,694.36 Job stability subsidy 111,468.81 98,244.00 VAT deduction for recruiting poor people 12,350.00 - Gain on debt restructuring 1,512.39 119,554.03 Land and property tax preference - 391,094.76 VAT return - 43.32 Total 30,179,668.51 7,173,155.47 51.Gain on fair value change Source of gain on FV change Current year Last year Other noncurrent financial assets 14,073,910.32 -46,991,034.40 Total 14,073,910.32 -46,991,034.40 52.Investment income Items Current year Last year Long-term equity investment gain under -4,884,731.99 -37,218,861.27 equity method Gain from disposal of long-term equity - 109,098,404.60 investment Gain from FV remeasurement of the shares - 170,729,805.79 on obtaining control Gain from holding of other noncurrent 5,796,799.24 20,671,710.39 financial assets Gain from disposal of other no-current - 43,296,525.04 financial assets Gain on debt restructuring 1,790,089.90 110,913.39 Discounting fees for bank acceptance note -1,595,528.43 - Dividend received for other equity - - instrument held Total 1,106,628.72 306,688,497.94 147 53.Credit impairment loss (loss listed as “-”) Items Current year Last year Bad debt loss on notes receivable 91,074.58 -789,111.45 Bad debt loss on receivable -68,147,779.35 -77,384,660.21 Bad debt loss on other receivable -1,885,950.98 -4,020,227.27 Bad debt loss on long term receivable 210,600.00 -501,389.82 Total -69,732,055.75 -82,695,388.75 54.Assets impairment losses (loss listed as “-”) Items Current year Last year Loss on impairment of inventory and cost to -17,646,037.59 -39,711,456.37 fulfill the contract obligation Loss of contract asset impairment 4,767,716.49 -30,814,338.63 Impairment on other non-current asset -1,527,371.56 - Impairment on construction in progress - -4,300,000.00 Total -14,405,692.66 -74,825,795.00 55.Gain on assets disposal (loss listed as “-”) Item Current year Last year Gain on non-current assets disposal -1,184,930.14 194,556.13 Including: gain on non-current assets -1,184,930.14 194,556.13 disposal not classified as held for sale Including: gain on fixed assets disposal -689,706.84 194,556.13 gain on intangible assets disposal -433,100.00 - gain on early derecognition of use -62,123.30 - right asset Total -1,184,930.14 194,556.13 148 56. Non-operating income (1) Non-operating income list Amounts recognized into Item Current year Last year non-recurring profit or loss for the year Loss claimed reverse 10,206,786.86 - 10,206,786.86 Penalty received 2,021,941.14 6,612,182.54 2,021,941.14 Creditor giving up 1,895,792.78 4,345,157.74 1,895,792.78 Gain on disposal of 93,160.73 non-current asset 39,884.14 39,884.14 Contract withdrawn and received in advance - 432,311.90 - transferred to non-operating income Other items 369,517.17 358,715.64 369,517.17 Total 14,533,922.09 11,841,528.55 14,533,922.09 57.Non-operating expenses Amounts recognized into Item Current year Last year non-recurring profit or loss for the year Non-current assets scrap 5,511,195.40 191,291.12 5,511,195.40 loss Compensation 952,429.15 2,813,844.43 952,429.15 Outward donation 360,000.00 57,000.00 360,000.00 Expected loss for open - 2,019,000.00 - litigation Others 142,852.98 123,404.80 142,852.98 Total 6,966,477.53 5,204,540.35 6,966,477.53 149 58. Income tax expenses (1) Income tax expenses Items Current year Last year Current income tax expenses 25,126,696.59 5,482.46 Deferred income tax expenses -14,094,997.51 571,333.82 Total 11,031,699.08 576,816.28 (2) Adjustment process of accounting profit and income tax expense Items Current year Consolidated total profit this year 65,206,238.83 Income tax expenses at applicable tax rate 9,780,935.82 Effect on subsidiary applied to different tax rate -1,415,501.20 Effect on prior period income tax adjustment 503,530.40 Effect on non-taxable income -657,243.07 Effect on non-deductible cost, expense and loss 1,850,564.14 Effect on use of deductible loss from unrecognized deferred tax assets in the prior period -546,630.00 Deferred tax assets recognized for prior period temporary difference -1,127,554.15 Effect on temporary difference or deductible loss from unrecognized deferred tax assets this year 20,404,968.93 R&D expenditure accelerated deduction -20,664,943.68 Others 2,903,571.89 Income tax expense 11,031,699.08 59. Other comprehensive income Refer to the note “VI.40 Other comprehensive income” for details. 150 60. Notes to cash flow statement (1) Cash relevant to operating activities 1) Cash received relevant to operating activities Items Current year Last year Deposit returned 56,211,426.27 43,441,397.62 Lease premium received 34,669,117.40 14,641,754.19 Government grants 15,077,248.10 5,669,861.48 Interest income 8,914,720.67 5,128,719.77 rd Receivable from the 3 party 3,001,285.07 4,656,358.49 Compensation 2,497,389.05 10,248,694.24 Received travel expense refund 1,834,601.94 3,180,530.19 Frozen money refund 550,487.90 3,407,480.07 Others 4,072,381.79 2,065,719.26 Total 126,828,658.19 92,440,515.31 2) Cash paid relevant to operating activities Items Current year Last year Expenditure 202,530,612.54 122,463,075.59 Deposit paid 50,899,935.96 89,837,201.58 Frozen accounts 21,363,555.30 209,197.14 Business travel borrowing 8,978,717.58 6,698,577.75 Bank handling charges 3,533,466.20 1,737,635.11 Unsettled AR/AP among non-related party 181,386.21 2,896,588.50 Others 2,935,250.16 8,261,197.76 Total 290,422,923.95 232,103,473.43 (2) Cash relevant to investing activities 1) Significant cash received relevant to investing activities Items Current year Last year Cash dividend 44,342,521.09 109,215,313.16 2) Significant cash paid relevant to investing activities Items Current year Last year Purchase of long-term asset 89,321,945.50 50,713,747.56 3) Other cash paid relevant to investing activities Items Current year Last year 151 Fixed-term deposit 168,000,000.00 - (3) Cash relevant to financing activities 1) Other cash received relevant to financing activities Items Current year Last year Notes payable to supplier 55,956,005.87 - Sale leaseback and financial lease 6,600,000.00 12,000,000.00 Notes discounted 3,119,926.93 11,991,047.27 Total 65,675,932.80 23,991,047.27 2) Others cash paid relevant to financing activities Items Current year Last year Payment of guarantee money 39,502,750.62 - Notes payable to supplier 13,629,318.00 - Sale& leaseback and financial lease 10,891,978.68 25,415,743.25 Lease premium payable 6,585,497.64 3,713,373.61 Discount interest on credit letter 80,863.54 - Total 70,690,408.48 29,129,116.86 152 3) Changes on liability relevant to financing activities Increased Decreased Opening Items Closing Balance Balance Non- cash Non- cash Cash change Cash change change change Short-term borrowings 274,052,990.15 298,643,636.90 10,207,457.33 314,000,000.00 6,616,300.00 262,287,784.38 Long-term borrowings 715,100,000.00 87,000,000.00 - 27,900,000.00 94,500,000.00 679,700,000.00 Lease liability 11,230,532.05 - 29,093,821.83 15,982,846.23 206,520.68 24,134,986.97 Non-current liability due - within one year 63,105,954.56 104,016,474.87 14,960,912.15 1,516,169.64 150,645,347.64 Long-term payable 31,009,644.16 6,600,000.00 10,845,763.56 22,948,324.57 15,175,145.85 10,331,937.30 Other payable-supplier platform - 55,956,005.87 137,410,509.60 13,629,318.00 - 179,737,197.47 Total 1,094,499,120.92 448,199,642.77 291,574,027.19 409,421,400.95 118,014,136.17 1,306,837,253.76 153 61. Supplementary information of consolidated cash flow statement (1) Information Items Current year Last year 1. Adjusting net profit into cash flows of operating —— —— activities: Net profit 54,174,539.75 20,366,757.66 Add: Provision for impairment of assets 14,405,692.66 74,825,795.00 Provision for impairment of credit 69,732,055.75 82,695,388.75 Depreciation of fixed assets, Amortization of 135,625,135.60 82,258,092.89 mineral resources, and biological assets Depreciation of right-of-use assets 11,340,839.21 3,709,086.79 Amortization of intangible assets 13,570,693.11 10,478,529.57 Amortization of long-term deferred expenses 1,545,642.28 1,455,157.51 Losses on disposal of fixed assets, intangible assets, 1,184,930.14 -194,556.13 and long-term assets (income listed with”-”) Losses on write-off of fixed assets (income listed 5,471,311.26 98,130.39 with”-”) Change of fair value profit or loss -14,073,910.32 46,991,034.40 Financial expense (income listed with”-”) 37,918,133.57 18,581,726.78 Investment loss (income listed with”-”) -1,106,628.72 -306,688,497.94 Decrease of deferred tax assets (increase listed -21,471,717.58 9,978,391.90 with”-”) Increase of deferred tax liabilities (decrease listed 864,530.06 -9,407,058.08 with”-”) Decrease of inventories (increase listed with”-”) -257,408,322.60 -412,972,663.16 Decrease of operating receivables (increase listed -500,972,621.69 -1,052,478,135.51 with”-”) Increase of operating payables (decrease listed 424,759,029.78 1,374,055,519.82 with”-”) Others - - Net cash flows arising from operating activities -24,440,667.74 -56,247,299.36 2. Significant investment and financing activities — — unrelated to cash income and expenses Liabilities transferred to capital - - Convertible bonds within 1 year - - Financing leased fixed assets - - 3. Net increase (decrease) of cash and cash — — 154 Items Current year Last year equivalent Closing balance of cash 670,440,335.98 921,661,803.17 Less: Opening balance of cash 921,661,803.17 438,969,337.87 Add: Closing balance of cash equivalent - - Less: Opening balance of cash equivalent - - Net increase of cash and cash equivalent -251,221,467.19 482,692,465.30 (2) Net cash paid to acquisition of subsidiary Items Current year Cash & cash equivalent paid for acquisition 145,285,500.00 Sonyo Refrigeration (Dalian) Co., Ltd. 145,285,500.00 Less: Cash & cash equivalent held by acquirees on acquisition date 133,228,548.98 Sonyo Refrigeration (Dalian) Co., Ltd. 133,228,548.98 Add: Cash & cash equivalent paid for prior period’s acquisition - Net cash paid to acquisition of subsidiary 12,056,951.02 (3) Cash and cash equivalents Items Current year Last year Cash 670,440,335.98 921,661,803.17 Including: Cash on hand 70,750.93 80,702.47 Bank deposit used for paying at any moment 670,303,450.55 921,581,100.70 Other monetary fund for paying at any moment 66,134.50 - Deposit fund in central bank available for payment - - Cash equivalent - - Including: bonds investment with maturity in 3 months - - Closing balance of cash and cash equivalents 670,440,335.98 921,661,803.17 Cash and cash equivalents with restriction within the - - Company and its subsidiaries of the group 155 (4) Monetary fund not belonging to cash and cash equivalent Items Current year Last year Reasons Fixed term deposit 168,000,000.00 - Held to maturity Guarantee money for bank 44,200,486.65 48,567,322.04 Guarantee money acceptance note Guarantee money for guarantee 41,547,977.10 33,697,941.99 Guarantee money letter Frozen 21,578,536.32 550,487.90 Frozen Interest receivable 2,321,702.76 959,002.78 Held to maturity Rural workers’ salary account 1,731,234.30 - Special account restriction Rural workers guarantee fund 1,219,297.00 729,341.30 Guarantee money Total 280,599,234.13 84,504,096.01 — 62. Change of shareholder’s equity None 63. Monetary category of foreign currency (1) Monetary category of foreign currency Closing Balance Exchange Item Closing Balance (RMB) (foreign currency) Rate Cash — — — Including:USD 833,133.93 7.0827 5,900,837.69 JPY 106,591,562.00 0.0502 5,352,282.10 Euro 44,150.36 7.8592 346,986.51 HK$ 93,239.38 0.9062 84,495.39 Accounts receivable — — — Including: USD 7,081,806.85 7.0827 50,158,313.38 JPY 76,615,583.00 0.0502 3,847,098.27 Euro 690,473.72 7.8592 5,426,571.06 Accounts payable — — — Including: USD 1,124,814.88 7.0827 7,966,726.35 JPY 35,741,667.00 0.0502 1,794,696.33 Other accounts payable — — — Including: JPY 8,304,510.00 0.0502 416,994.36 156 64. Lease (1) As a lessee Items Current year Last year Interest expense on lease liabilities 1,043,053.19 1,259,087.12 Short-term lease expense recognized in income statement 4,114,059.87 1,650,882.62 Low-value asset lease expense recognized in income statement (excl short-term lease) - - Income from the sublease of the right-of-use the assets - - Sum of cash outflows related to leases 8,453,910.59 5,364,256.23 Cash inflow from sale and leaseback transactions 6,600,000.00 12,000,000.00 Cash outflow from sale and leaseback transactions 10,891,978.68 25,415,743.25 (2) As a lessor Operating lease Include: income related to variable lease Items Lease income payments not included in lease payment receivable Office and plant 28,888,128.11 - Apartment 106,380.96 - Total 28,994,509.07 - 65. Research and development expense Items Current year Last year Labor cost 102,598,481.06 52,660,638.70 Material cost 20,934,040.54 12,253,575.39 Depreciation and amortization 14,685,194.95 6,409,516.10 Others 25,968,001.16 5,469,075.50 Total 164,185,717.71 76,792,805.69 Expensed R&D 164,185,717.71 76,792,805.69 Capitalized R&D - - 157 VII. Change of Consolidation Scope 1. Business combination not under same control (1) Business combination not under same control this year Share Information between acquisition date and the year Acquisition Basis for determining end Acquire acquisition Cost (%) Method date acquisition date point Revenue Net profit cashflow Sonyo Refrigeration Purchase 2023-6-2 145,285,500.00 100.00 2023-6-2 Transfer of control 253,806,212.28 3,987,334.85 -82,362,599.35 (Dalian) Co., with cash Ltd. 158 (2) Combination cost and goodwill Sonyo Refrigeration Item (Dalian) Co., Ltd. Cash 145,285,500.00 FV of non-cash asset - FV of shareholding held prior to acquisition on acquisition date - Total of combination cost 145,285,500.00 Less: proportion of FV of identifiable net asset obtained 107,228,836.48 The difference between goodwill/cost of combination less and proportion of FV of identifiable net asset obtained 38,056,663.52 (3) Identifiable asset, liability of acquiree on acquisition date Sonyo Refrigeration (Dalian) Co., Ltd. Items FV on acquisition date BV on acquisition date Assets: 780,585,239.05 701,851,729.23 Monetary funds 135,690,886.90 135,690,886.90 Accounts receivable 140,250,048.25 140,250,048.25 Prepayment 5,562,914.24 5,562,914.24 Inventory 299,313,831.40 299,313,831.40 Other equity instrument investment 1,717,629.40 1,336,959.00 Fixed asset 112,691,400.61 50,374,134.76 Construction in process 1,324,905.50 1,324,905.50 Right-of-use asset 6,736,919.97 6,736,919.97 Intangible asset 36,748,493.16 20,712,919.59 Deferred tax asset 7,512,572.08 7,512,572.08 Other current asset 33,035,637.54 33,035,637.54 Liability: 673,356,402.57 661,546,376.10 Accounts payable 588,702,714.87 588,702,714.87 Employee payable 32,347,444.78 32,347,444.78 Lease liability 7,287,087.48 7,287,087.48 Deferred Tax liability 11,810,026.47 - Other current liability 33,209,128.97 33,209,128.97 Net asset 107,228,836.48 40,305,353.13 les:Minority interest - - Net asset obtained 107,228,836.48 40,305,353.13 159 (4) Others None. VIII. Interest in other entity 1.Equity of subsidiaries (1) Organization structure of group company Registered Main Shareholding (%) Registere Obtaining Name of subsidiaries capital business Business nature d address Direct Indirect method (10K) address Dalian Bingshan Group 30,000.00 Dalian Dalian Installation 100 - Establish Engineering Co., Ltd. Chengdu Bingshan Refrigeration 1,000.00 Chengdu Chengdu Service - 51 Establish Engineering Co., Ltd. Dalian Bingshan Group 1,800.00 Dalian Dalian Trading 100 - Establish Sales Co., Ltd. Dalian Bingshan Air-conditioning 8,254.00 Dalian Dalian Manufacturing 100 - Establish Equipment Co., Ltd. Dalian Bingshan Guardian Automation 5,070.07 Dalian Dalian Manufacturing 100 - Establish Co., Ltd. Dalian Bingshan-RYOSETSU 5,757.87 Dalian Dalian Manufacturing 100 - Establish Quick Freezing Equipment Co., Ltd. Wuhan New World Refrigeration Industrial 20,000.00 Wuhan Wuhan Manufacturing 100 - Acquisition Co., Ltd. Wuhan New World Air-conditioning 3,500.00 Wuhan Wuhan Installation - 100 Establish Refrigeration Engineering Co., Ltd Wuhan Lanning Energy 2,200.00 Wuhan Wuhan Trading - 100 Acquisition Technology Co., Ltd. Dalian Universe Thermal 8,000.00 Dalian Dalian Manufacturing 55 - Acquisition 160 Name of subsidiaries Registered Main Registere Business nature Shareholding (%) Obtaining capital business d address method Technology Co., Ltd. (10K) address Dalian Bingshan Engineering & Trading 3,000.00 Dalian Dalian Service 100 - Acquisition Co., Ltd Sonyo Compressor 44,239.67 Dalian Dalian Manufacturing 100 - Acquisition (Dalian)Co., Ltd. Sonyo Refrigeration 10,500.00 Dalian Dalian Manufacturing 100 - Acquisition System (Dalian) Co., Ltd. Sonyo Refrigeration 21,208.47 Dalian Dalian Manufacturing 100 - Acquisition (Dalian) Co., Ltd. 1) All the proportion of shareholding in subsidiaries were the same with voting right. 2) The Company held over 50% voting right in subsidiaries and could control these subsidiaries with over 50% voting right. (2) There are no significant non-subsidiaries. 2.Change of equity share in subsidiary which is still under control (1) Change of equity share in subsidiary None. 161 3.Equity in joint venture arrangement or associated enterprise (1) The important affiliated companies Shareholding (%) Main Name of joint ventures or Registered Business Accounting business affiliated companies address nature methods address Direct Indirect Dalian Fuji Bingshan Equity Vending Machine Co., Ltd Dalian Dalian Manufacturing 49.00 - method Jiangsu Jingxue Insulation Equity Changzhou Changzhou Manufacturing 14.91 - Technology Co., Ltd method Dalian Bingshan Metal Equity Dalian Dalian Manufacturing 49.00 - Technology Co., Ltd. method 1) The Company has the same percentage of shareholding and voting right in joint-venture or affiliated company. 2) The Company doesn’t have joint venture or affiliated companies which have no significant influence although being held 20% or more voting rights. 162 (2) The key financial information of affiliated companies Closing balance/Current year Items Dalian Fuji Bingshan Vending Jiangsu Jingxue Insulation Dalian Bingshan Metal Machine Co., Ltd Technology Co., Ltd Technology Co., Ltd. Current assets 279,515,256.77 1,513,841,724.68 334,413,727.30 Including: Cash and cash equivalents 18,195,178.30 151,387,053.19 163.052.296.71 Non-current assets 190,659,275.57 301,638,618.76 38,148,931.23 Total assets 470,174,532.34 1,815,480,343.44 372,562,658.53 Current liabilities 300,289,317.09 943,431,015.22 58,315,558.14 Non-current liabilities 32,367,401.38 40,353,776.15 - Total liabilities 332,656,718.47 983,784,791.37 58,315,558.14 Total net asset 137,517,813.87 831,695,552.07 314,247,100.39 Minority interests - 274,736.66 - Equity to the parent company 137,517,813.87 831,420,815.41 314,247,100.39 Share of net assets according to the shareholding proportions 67,383,728.80 123,964,843.58 153,981,079.19 Adjusting events - - - —Goodwill 226,689.29 20,390,060.33 19,269,770.94 —Unrealized profits of insider trading - - - --Others - - - Book value of equity investment of affiliated companies 67,610,418.09 144,354,903.91 173,250,850.13 163 Closing balance/Current year Items Dalian Fuji Bingshan Vending Jiangsu Jingxue Insulation Dalian Bingshan Metal Machine Co., Ltd Technology Co., Ltd Technology Co., Ltd. Fair value of equity investment with public offer - - - Operating income 209,845,287.10 1,152,098,034.96 464,881,380.24 Financial expense 11,084,822.85 1,934,530.46 -2,682,355.04 Income tax expense -353,797.35 4,996,495.33 10,449,723.61 Net profit -85,684,074.85 38,019,504.83 63,729,802.01 Net profit of discontinuing operation - - - Other comprehensive income - - - Total comprehensive income -85,684,074.85 38,019,504.83 63,729,802.01 The current dividends received from joint ventures - 1,610,172.00 33,134,422.30 164 (Continued) Opening balance/Last year Items Dalian Fuji Bingshan Vending Jiangsu Jingxue Insulation Dalian Bingshan Metal Machine Co., Ltd Technology Co., Ltd Technology Co., Ltd. Current assets 447,012,221.67 1,357,769,579.89 331,577,731.99 Including: Cash and cash equivalents 8,768,885.75 210,766,589.69 171,454,780.42 Non-current assets 220,481,862.47 302,638,265.60 36,680,264.69 Total assets 667,494,084.14 1,660,407,845.49 368,257,996.68 Current liabilities 391,692,836.48 827,081,128.54 49,800,779.28 Non-current liabilities 49,526,450.43 29,830,925.61 - Total liabilities 441,219,286.91 856,912,054.15 49,800,779.28 Total net asset 226,274,797.23 803,046,200.14 318,457,217.40 Minority interests - 449,591.20 - Equity to the parent company 226,274,797.23 803,046,200.14 318,457,217.40 Share of net assets according to the 110,874,650.64 119,734,188.43 156,044,036.52 shareholding proportions Adjusting events - - - —Goodwill 226,689.29 20,390,060.33 19,269,770.94 —Unrealized profits of insider trading - - - --Others - - Book value of equity investment of 111,101,339.93 140,124,248.76 175,313,807.46 affiliated companies Fair value of equity investment with public - - - 165 Opening balance/Last year Items Dalian Fuji Bingshan Vending Jiangsu Jingxue Insulation Dalian Bingshan Metal Machine Co., Ltd Technology Co., Ltd Technology Co., Ltd. offer Operating income 175,460,421.16 902,517,681.24 433,120,778.54 Financial expense 10,357,794.72 854,477.47 -7,161,210.92 Income tax expense -10,755.71 2,621,080.54 9,728,042.54 Net profit 2,430,819.76 39,722,362.41 62,395,419.10 Net profit of discontinuing operation - - - Other comprehensive income - - - Total comprehensive income 2,430,819.76 39,722,362.41 62,395,419.10 The current dividends received from joint - 4,732,344.00 23,402,022.05 ventures 166 (3) Summary financial information of insignificant affiliated companies Items Current year Last year Affiliated company — — Total book value of investment of affiliated companies 136,058,775.37 123,418,337.24 The total of following items according to the shareholding proportions — — Net profit 3,826,157.59 28,021,453.13 Other comprehensive income - - Total comprehensive income 3,826,157.59 28,021,453.13 (4) Significant restrictions of the ability of affiliated companies transferring funds to the Company. No. (5) Contingency related to joint venture or affiliated company need to be disclosed. No. IX. Government Grant 1. Liability item involved in government grant Into non- The value Related to Opening Into other Closing Items Increase operating offset cost asset/ Balance income Balance income and expense income Deferred 82,332,725.05 4,438,585.80 - 3,850,546.24 - 82,920,764.61 asset income Deferred asset/inco income 17,421,621.34 487,400.00 - 2,555,518.15 - 15,353,503.19 me Deferred - 5,596,143.93 - 5,596,143.93 - - income income Total 99,754,346.39 10,522,129.73 - 12,002,208.32 - 98,274,267.80 — 2. Recognized in income statement Items Current year Last year Other income 12,002,208.32 6,473,525.00 Administration expense - -5,306,977.43 167 X. Risk Related to Financial Instruments The main financial instruments held by the group are borrowings, accounts receivable, accounts payable, other non-current financial asset etc. The detailed explanation is referred to the note No.VI. The related risks of these financial instruments and the risk management policy conducted to reduce these risks by the group are introduced as below. The group management conducts to manage and monitor these risks exposure and control these risks under certain risk level. 1. Objectives and policies of each risk management The objectives of risk management conducted by the Company are to reach the balance between risk and profit return by reducing the negative influence to operating performance to the minimum level as well as maximizing the shareholders’ and other investors’ profits. Based on these objectives, the basic risk management policy is to recognize and analyze all sorts of risk that the Company faced with, to set up the proper risk tolerance bottom line conducting risk management, as well as to monitor these risks in a timely and effective manner, and to ensure these risks under the limit level. (1) Market risk 1) Exchange rate risk Most of the Company’s business is located in China, and settled with RMB. But the Company defined exchange rate risk of assets, liabilities dominated in foreign currency and future transaction dominated in foreign currency (mainly including USD, JPY, EURO, HKD and GBP). The financial department of the Company monitors the Company’s foreign currency transaction and the scale of foreign assets and liabilities, and decreases exchange rate risk. During the current year the Company did not agree any forward foreign exchange contract or currency swap contract .As at 31st December 2023, the Company’s assets and liabilities dominated in foreign currency are listed in RMB as following: 168 Items December 31, 2023 December 31, 2022 Monetary fund-USD 5,900,837.69 5,254,881.87 Monetary fund-JPY 5,352,282.10 1,367,327.65 Monetary fund- EURO 346,986.51 1,354,512.09 Monetary fund- HKD 84,495.39 - Receivable -USD 50,158,313.38 40,859,881.78 Receivable -JPY 3,847,098.27 2,715,738.67 Receivable - EURO 5,426,571.06 7,467,708.34 Payables -USD 7,966,726.35 5,849,006.89 Payables -JPY 1,794,696.33 1,873,402.54 Payables - GBP - 312,884.03 The group paid close attention to the effect on FX risk. 2) Interest rate risk The interest risk of the group incurred from bank loan, risk of a floating interest rate of financial liabilities that lead to the group facing cash flow interest rate risk, financial liabilities with a fixed interest rate lead to the group facing cash flow interest rate risk. The company determined the proportion of fixed interest rate and floating interest rate according the current market circumstance. The group’s interest-bearing debt is borrowings of RMB 799,000,000.00 at fixed interest rate as of December 31,2023(borrowings of RMB 740,000,000.00 in2022). The financial department of the group continuously monitors the interest rates level, and the management would make some adjustment to lower the interest rate risk according to the latest market situation. Climbing interest rate will increase the cost of newly increased interest-bearing liability and interest expense for unsettled interest-bearing liability at floating rate and have adverse effect on the business performance. The sensitive analysis: As at 31st December 2023, based on the assumption of interest rate change of 50 BP, the group’s net profit of current year will increase or decrease3.9955 million Yuan. 3) Price risk The price risk of the Company is mainly commodity price risk. The Company sells products at market prices. As the national economy enters the "new normal", the manufacturing industry is under great economic downward pressure, and the drastic fluctuations of bulk material prices have a certain impact on the group 's operations. (2) Credit risk 169 The credit risk of the group comes from monetary fund, notes receivable, accounts receivable, and other accounts receivable etc. The management made credit policies and monitored changes of this credit exposure. The group 's monetary fund was in bank with higher credit rating, so there was no significant credit risk, nor significant losses due to the default of other entity. Upper limit policy is adopted to avoid any credit risk from financial institution. The group made relevant policy to control credit risk exposure from receivable, other receivable and notes receivable. The group assesses the client’s credit background according to the client’s financial performance, possibility of obtaining guarantee from the 3rd party, credit record and other factors such as current market. The group will periodically monitor the credit situation of the client and will take measures such as prompt letter, shorten credit period or cancel the credit to ensure the overall credit risk within the controllable scope. As at 31st December 2023, the top five customers of receivable accounts balance are 240,544,632.79Yuan. (3) Liquidity risk Liquidity risk was referred to the risk of shortage of funds incurred when the enterprise fulfills the obligation of settlement by cash or other financial assets. The way to manage the liquidity risk is to ensure enough fund available to fulfill the liability by due date in prevention from unacceptable loss of or reputation damage to the group. The group periodically analyze the liability structure and expiry date and the financial department of the group continued to monitors the short term or long-term capital needs to ensure maintain plenty of cash flow. And the same time they also monitor the condition of bank loan agreements and obtain commitments from banks to reduce liquidity risks. The fund mainly comes from bank loan. By December 31st, 2023, the credit limit still available is 618.30 million Yuan and short-term credit limit available is 618.30 million Yuan. As at 31st December 2023, the group’s financial assets and financial liabilities in line with non-discounted cash flow of the contracts as following: 170 Currency unity:10kYuan Within 1 Items 1-2 years 2-5 years Over 5 years Total year Financial Assets — — — — — Cash and cash in bank 95,103.96 - - - 95,103.96 Notes receivable 35,342.89 - - - 35,342.89 Accounts receivable 157,643.39 - - - 157,643.39 Financing receivable 30,358.52 - - - 30,358.52 Other Receivable 4,138.17 - - - 4,138.17 Contract asset 23,707.69 - - - 23,707.69 Other current asset 2,607.43 - - - 2,607.43 Other non-current - - - 16,402.48 16,402.48 financial asset Financial Liabilities — — — — — Short-term loan 26,228.78 - - - 26,228.78 Notes Payable 67,072.10 - - - 67,072.10 Accounts payable 165,583.54 - - - 165,583.54 Other payable 27,880.42 - - - 27,880.42 Employee’s payable 14,949.71 - - - 14,949.71 Tax payable 2,221.65 - - - 2,221.65 Non-current liability 15,064.53 - - - 15,064.53 due within 1 year Long-term loan - 34,600.00 32,570.00 800.00 67,970.00 Lease obligation - 561.13 881.77 970.60 2,413.50 Long-term payable - 208.75 824.44 - 1,033.19 171 2. Financial asset transfer (1) Classified by transfer method Transfer Nature Amount Derecognition Basis for derecognition method Bank acceptance Endorsement All risk and reward bill with high credit 374,572,818.64 Y of a bill have been transferred rating Bank acceptance Discounting All risk and reward bill with high credit 151,620,157.02 Y a bill have been transferred rating Bank/trade Endorsement Retain mostly risk and acceptance bill with /discounting 151,582,675.36 N reward including non-high credit of a bill default risk rating All risk and reward Factoring Receivable 10,000,000.00 Y have been transferred Total — 687,775,651.02 — — (2) Derecognized financial asset due to transfer Derecognized Gain/loss from Item Transfer method Amount derecognition Bank acceptance bill with Endorsement of a bill 374,572,818.64 - high credit rating Bank acceptance bill with Discounting a bill 151,620,157.02 -1,944,537.05 high credit rating Factoring without Receivable 10,000,000.00 - recourse Total — 536,192,975.66 -1,944,537.05 XI. Disclosure of Fair Value 1. Amount and measurement level of the assets and liabilities measured at fair value at the year end 172 Fair value at the year end 1st level 2nd level 3rd level Items measurement of measurement of measurement of Total FV FV FV Financial assets Continuously — — — — measured at FV Receivable financing - 303,585,218.53 - 303,585,218.53 Other non-current 162,340,919.04 - 1,683,852.59 164,024,771.63 financial asset Total 162,340,919.04 303,585,218.53 1,683,852.59 467,609,990.16 2. Basis for Market price of first level measurement of fair value Equity instrument portion of the other noncurrent financial asset is measured at the unadjusted closing quoted price of Guotai Junan shares on stock market on December 29, 2023. 3. For continuous and discontinuous 2nd level of FV, valuation technique adopted and key parameter quantitive and qualitive information. Bank acceptance notes (receivable financing) as measured at fair value through other comprehensive income is within this scope. Bank acceptance notes held by the group mainly are high credit grading from the large commercial bank. As the remaining maturity is short and credit risk is very low, on the balance sheet date, the book value of bank acceptance notes receivable is similar to fair value. 4. For continuous and discontinuous 3rd level of FV, valuation technique adopted and key parameter quantitive and qualitive information. As of December 31, 2023, the book value of the share investment in Guotai Junan Investment Management Co.,Ltd and Wuhan Steel and Power Co.,Ltd is 1,683,852.59 Yuan. It is presented as other non-current financial asset in accordance with No.22- financial instrument recognition and measurement of Accounting Standards for Business Enterprises. Having considered there is neither active market for invested company’s share nor market price is available for reference, and it is not feasible to obtain the relevant observable input value. FV of the investment is measured at cost by taking influence factor of FV into consideration. 5. For continuous 3rd level of FV, adjusted information of opening and closing balance and sensitivity analysis of unobservable parameter. 173 No. 6. Assets continuously measured at fair value have switched among different level during the year. No. 7. Changes of valuation technique and reasons for changes No. 8. Assets and liability are disclosed at FV rather than measured at FV No. XII. Related Parties Relationship and Transactions i. Related parties’ relationship 1. Controlling shareholder and ultimate controller (1) Controlling shareholder and ultimate controller Voting Shareholding Parent Registered Business Registered power percentage company address nature capital(10K) percentage (%) (%) Dalian Bingshan Dalian Manufacture 15,858.00 20.27 20.27 Group Co., Ltd. Note: Dalian Bingshan Group Co., Ltd. is a Sino –foreign joint venture located No.106 Liaohe East Road, DDZ, Dalian, China. The legal representative of Dalian Bingshan Group Co., Ltd. is Mr. Ji Zhijian, and the registered capital is RMB158.58 million. The registered business operation period is from 3rd July 1985 to 2nd July 2035. The business scope includes research, development, manufacture, sales, service and installment of refrigeration equipment, cooling and freezing equipment, different size of air-conditioners, petrochemical equipment, electronic and electronic- control products, home electronic appliance, environment protect equipment and etc. (unless the licenses needed) The Company’s ultimate controller is Dalian Bingshan Group Co., Ltd. 2. Subsidiaries Referrer to the content in the Note “VIII. 1. (1) Organization structure of group company”. 174 3. Affiliated company and joint venture The information of the affiliated company and joint venture please refers to the note “VIII. 3.(1) The significant affiliated company and joint venture’. The Company had transactions with related parties during the current period or last period, including: Names of the joint ventures or affiliated company Relationships with the Company Keinin-Grand Ocean Thermal Technology (Dalian) Affiliated company of the Company Co., Ltd. Dalian Fuji Bingshan Vending Machine Co., Ltd. Affiliated company of the Company Dalian Fuji Bingshan Vending Machine Sales Co., Affiliated company of the Company Ltd. Jiangsu Jingxue Insulation Technology Co., Ltd. Affiliated company of the Company MHI Bingshan Refrigeration (Dalian) Co., Ltd. Affiliated company of the Company Dalian Honjo Chemical Co., Ltd. Affiliated company of the Company Dalian Bingshan Metal Technology Co., Ltd. Affiliated company of the Company Dalian Bingshan Group Huahuida Financial Leasing Affiliated company of the Company Co., Ltd. Wuhan Sikafu Power Control Equipment Co., Ltd. Affiliated company of its subsidiary Dalian Bingshan Group Huayida Commercial Subsidiary of its affiliated company Factoring Co., LTD Dalian Jingxue Freezing Equipment Co., Ltd. Subsidiary of its affiliated company Shanghai Jingxue Freezing Equipment Co., Ltd. Subsidiary of its affiliated company Jiangsu Jingxue Insulation Environmental Subsidiary of its affiliated company Engineering Co., Ltd. 4. Other related parties Name of related party Related party relationship Company under direct/indirect Control of Panasonic Both parties are under the control of or significant Co., Ltd influence by the same party Both parties are under the control of or significant Sanyo Corporation influence by the same party Panasonic Corporation of China Co., Ltd Directors of the Company also serve as directors Both parties are under the control of or significant Dalian Spindle Environmental Facilities Co., Ltd. influence by the same party LINDE HYDROGEN FUELTECH (DALIAN) CO., Both parties are under the control of or significant LTD. influence by the same party Both parties are under the control of or significant Dalian Shentong Electric Co., Ltd. influence by the same party from January to April, 2023 Both parties are under the control of or significant Dalian Fuji Bingshan Control System Co., Ltd. influence by the same party 175 Name of related party Related party relationship Both parties are under the control of or significant BAC Dalian Co., Ltd. influence by the same party Both parties are under the control of or significant Dalian Bingshan Wisdom Park Co., Ltd influence by the same party Dalian Bingshan Part Technology Co., LTD. Under control of the same ultimate controlling party Alphavita Bio-scientific (Dalian) Co., Ltd. Under control of the same ultimate controlling party Bingshan Technology Service (Dalian) Co., Ltd. Under control of the same ultimate controlling party Directors and senior officers of the Company serve as directors and senior officers in Dalian Dalian Zhonghuida Refrigeration Technology Co., Ltd Zhonghuida Refrigeration Technology Co., Ltd Company Both parties are under the control of or significant Sonyo Cold Chain (Dalian) Co., Ltd. influence by the same party from April to December, 2023 Note: Companies under direct/indirect Control of Panasonic Co., Ltd are: Panasonic Electric Taiwan Co.,Ltd, Wanbao(Guangzhou) Compressor Co.,Ltd, Panasonic Electronic Devices(Jiangmen)Co.,Ltd, Panasonic R&D Center Suzhou Co.,Ltd Dalian Branch, Panasonic Procurement(CHINA)Co.,Ltd, Panasonic Industry (China) Co., Ltd. Panasonic Corporation, Panasonic Industry (China) Co., Ltd Shanghai Branch, Beijing 2nd Branch of Panasonic Electric Equipment (China)Co.,Ltd, Panasonic Electric Equipment (China)Co.,Ltd, Panasonic Appliances Air-Conditioning and Refrigeration Corporation, Panasonic Appliances Microwave Oven(Shanghai) Co.,Ltd, Panasonic Motor(Hangzhou)Co.,Ltd., Panasonic Home Appliances Air-Conditioning(Guangzhou)Co.,Ltd., Panasonic Hong Kong Co., Limited, PANASONIC PROCUREMENT (CHINA) CO., LTD. Sonyo Refrigeration (Dalian) Co., Ltd.(Jan-May, 2023), Sonyo Cold Chain (Dalian) Co., Ltd.( (Jan-Mar, 2023). Panasonic Appliances Air-Conditioning Malaysia SDN BHD, Panasonic Taiwan CO.,LTD., Panasonic Sales Taiwan CO.,LTD, Panasonic Procurement Malaysia SDN BHD, Panasonic Hong Kong Co.,Ltd, Panasonic Operational Excellence Co.,Ltd.(Pex), Panasonic Life Solutions India, Panasonic Industry Sales Asia, Panasonic Industry Europe GmbH, Panasonic Industrial Devices Sales, Panasonic India Pvt Ltd(APIN), Panasonic Global Procurement, Panasonic DoBrasil Limited–Miam, Panasonic Corporation Appliances Company Heating&Cooling Solutions Bd Commercial Air-Conditioning, Panasonic Corporation Appliances Company, Panasonic Corporation, Panasonic Commercial Equipment Systems Taiwan Co.Ltd, Panasonic Commercial Equipment Systems Asia, Panasonic Automotive&Industrial, Panasonic Appliances Air-Conditioning Malaysia Sdn.BHD, Panasonic Appliances Air-Conditioning, Pacific. Panasonic Commercial Equipment Systems Asia Pacific, Panasonic Heating&Ventilation, Panasonic Appliances Air-conditioning, Panasonic A.P. SALES (THAILAND) CO., LTD ii. Related Party transactions 1. Purchase of goods, offer and receive labour services etc inter-group transactions 176 (1) Purchase of goods/receive labour services Related party Content Current year Last year Dalian Bingshan Metal Technology Purchases of goods 63,809,032.17 10,017,493.41 Co., Ltd. Sonyo Cold Chain (Dalian)Co. Ltd Purchases of goods 40,499,927.26 135,529.36 Jiangsu Jingxue Insulation Purchases of goods 28,067,092.90 5,390,801.78 Technology Co., Ltd. BAC Dalian Co., Ltd. Purchases of goods 18,579,088.19 32,827,251.97 Company under direct/indirect Purchases of goods 13,763,555.55 24,447,037.82 Control of Panasonic Co., Ltd Dalian Bingshan Part Technology Purchases of goods 10,775,437.38 10,938,171.74 Co., LTD. Dalian Honjo Chemical Co., Ltd Purchases of goods 10,305,185.60 140,522.12 Bingshan Technology Service Purchases of goods 5,575,811.09 2,047,836.64 (Dalian) Co., Ltd. Dalian Fuji Bingshan Control System Purchases of goods 5,029,475.45 1,718,811.27 Co., Ltd. Alphavita Bio-scientific (Dalian) Co., Purchases of goods 4,466,987.61 - Ltd. Bingshan Technology Service Receive labor (Dalian) Co., Ltd. services 2,011,933.16 303,037.68 Dalian Shentong Electric Co., Ltd. Purchases of goods 1,680,077.95 9,480,036.79 Company under direct/indirect Receive labor Control of Panasonic Co., Ltd services 1,621,316.09 - Dalian Fuji Bingshan Vending Purchases of goods 505,497.50 753,944.37 Machine Co., Ltd Dalian Spindle Environmental Purchases of goods 780,949.56 1,407,486.73 Facilities Co., Ltd Dalian Bingshan Wisdom Park Co., Purchases of goods 80,441.60 100,943.39 Ltd Dalian Bingshan Wisdom Park Co., Receive labor Ltd services 47,169.81 - Dalian Fuji Bingshan Vending Purchases of goods 35,398.23 78,761.06 Machine Sales Co., Ltd Receive labor Dalian Bingshan Group Co., Ltd. 24,452.83 18,792.45 services Shanghai Jingxue Freezing Purchases of goods - 19,584.07 Equipment Co., Ltd Sonyo Refrigeration System (Dalian) Purchases of goods - 4,947,268.89 Co., Ltd. Sonyo Compressor (Dalian) Co., Ltd. Purchases of goods - 429,782.52 Total — 207,658,829.93 105,203,094.06 (2) Sales of goods/ labour services provision Related party Content Current year Last year Company under direct/indirect Control Sales of goods 285,292,151.76 147,935,120.42 of Panasonic Co., Ltd Sonyo Cold Chain (Dalian) Co., Ltd Sales of goods 138,639,729.84 122,871,855.60 177 Related party Content Current year Last year BAC Dalian Co., Ltd Sales of goods 69,977,098.57 65,002,512.47 Bingshan Technology Service (Dalian) Sales of goods 32,203,558.67 40,641,988.78 Co., Ltd. Dalian Fuji Bingshan Vending Machine Sales of goods 16,843,047.06 18,327,608.54 Co., Ltd Dalian Bingshan Wisdom Park Co., Ltd Sales of goods 13,402,551.72 323,553.82 MHI Bingshan Refrigeration (Dalian) Sales of goods 7,181,290.12 5,537,667.76 Co., Ltd. Alphavita Bio-scientific (Dalian) Co., Sales of goods 4,522,436.41 9,532,891.46 Ltd. Dalian Spindle Environmental Facilities Sales of goods 3,665,307.02 3,240,535.34 Co., Ltd Dalian Honjo Chemical Co., Ltd Sales of goods 1,863,564.01 91,981.13 Dalian Bingshan Part Technology Co., Sales of goods 1,742,813.23 1,395,237.01 LTD Linde Hydrogen Fueltech (Dalian) Co., Sales of goods 794,939.42 1,309,485.55 Ltd Dalian Fuji Bingshan Control System Sales of services 414,608.77 - Co., Ltd. Dalian Fuji Bingshan Control System Sales of goods 153,752.97 654,160.22 Co., Ltd. Dalian Bingshan Wisdom Park Co., Ltd Sales of services 141,509.43 - Dalian Shentong Electric Co., Ltd Sales of goods 120,092.03 522,107.10 Dalian Jingxue Freezing Equipment Co., Sales of goods 96,698.39 102,957.82 Ltd Dalian Bingshan Group Co., Ltd. Sales of service 43,018.86 - Dalian Bingshan Group Co., Ltd. Sales of goods 26,445.02 - Sonyo Compressor (Dalian)Co., Ltd. Sales of goods - 41,055,441.71 Sonyo Refrigeration System (Dalian) Sales of goods - 23,645,169.22 Co., Ltd. Dalian Bingshan Group Huahuida Sales of goods - 18,888,460.18 Financial Leasing Co., Ltd Jiangsu Jingxue Insulation Technology Sales of goods - 2,524,416.77 Co., Ltd Total — 577,124,613.30 503,603,150.90 (3) Assets Lease 178 (1) Assets rent out Category of Current year Last year Lease Lessee assets rent out Lease Income Income Dalian Bingshan Wisdom Park Co., Ltd Land/property 9,013,347.56 8,189,918.99 MHI Bingshan Refrigeration (Dalian) Co., Ltd. Plant 3,809,523.80 3,809,523.80 Linde Hydrogen Fueltech (Dalian) Co., Ltd Plant 2,360,040.71 2,759,026.37 Sonyo Cold Chain (Dalian)Co. Plant /Employee Ltd 2,160,513.31 3,465,470.95 dormitory Company under direct/indirect Plant/ office / Control of Panasonic Co., Ltd 1,483,508.26 336,180.42 dormitory Dalian Jingxue Freezing Equipment Co., Ltd. Plant and office 784,927.88 858,322.40 Wuhan Sikafu Power Control Equipment Co., Ltd Plant 721,045.88 730,954.13 Bingshan Technology Service (Dalian) Co., Ltd. Plant and office 355,081.77 443,699.06 Dalian Bingshan Part Plant and office 194,954.13 - Technology Co., Ltd. Dalian Bingshan Group Co., Office 66,055.05 132,110.09 Ltd. Dalian Spindle Environmental Facilities Co., Ltd. Office 20,069.72 - (2) Assets under lease Category of Lease premium paid Lessor assets rent in Current year Last year Dalian Bingshan Group Huahuida Fixed asset 25,173,657.70 28,659,750.85 Financial Leasing Co., Ltd (Continued) Interests on lease liabilities Increased right-of-use assets Lessor Current year Last year Current year Last year Dalian Bingshan Group Huahuida Financial Leasing Co., 2,067,080.20 698,321.11 - -26,150,305.01 Ltd (4) Warranty provided by Related Parties The national development fund planned to support the Company’s intelligent and green equipment of cold chain and service industry base project, and provide the special fund to the 179 controlling shareholder of the Company, Bingshan Group. Please refer to the “Note VI. 33 long term borrowings”. Funds borrow from /lent to related party Starting Ending Name of the related party Amount Explanation date date Dalian Bingshan Group Project fund Co., Ltd. 160,000,000.00 2016.03.14 2026.03.13 investment Dalian Bingshan Group Huahuida Financial 32,833,000.00 2022.09.29 2024.09.28 Factoring Leasing Co., Ltd Dalian Bingshan Group Huayida Commercial 15,000,000.00 2023.12.25 2024.12.24 Factoring Factoring Co., Ltd Dalian Bingshan Group Sale and Huahuida Financial 13,805,309.73 2021.11.10 2026.11.09 leaseback Leasing Co., Ltd Dalian Bingshan Group Sale and Huahuida Financial 12,000,000.00 2022.01.07 2025.01.06 leaseback Leasing Co., Ltd Dalian Bingshan Group Huahuida Financial 10,000,000.00 2023.01.09 2024.01.08 Factoring Leasing Co., Ltd Dalian Bingshan Group Huahuida Financial 10,000,000.00 2021.05.20 2024.05.19 Factoring Leasing Co., Ltd Dalian Bingshan Group Sale and Huahuida Financial 6,600,000.00 2023.02.24 2025.02.23 leaseback Leasing Co., Ltd Dalian Bingshan Group Huahuida Financial 5,481,000.00 2022.06.20 2024.06.19 Factoring Leasing Co., Ltd Dalian Bingshan Group Huahuida Financial 4,559,849.17 2023.08.31 2024.08.30 Factoring Leasing Co., Ltd Dalian Bingshan Group Huahuida Financial 3,499,485.17 2023.10.10 2024.10.09 Factoring Leasing Co., Ltd Dalian Bingshan Group Huayida Commercial 2,367,580.50 2023.12.22 2024.12.21 Factoring Factoring Co., Ltd Dalian Bingshan Group Sale and Huahuida Financial 1,876,663.49 2021.06.10 2024.06.09 leaseback Leasing Co., Ltd Dalian Bingshan Group Huahuida Financial 1,531,366.55 2023.09.08 2024.09.07 Factoring Leasing Co., Ltd Dalian Bingshan Group Huahuida Financial 731,470.43 2023.10.17 2024.10.16 Factoring Leasing Co., Ltd Dalian Bingshan Group Huahuida Financial 499,200.00 2023.05.22 2024.05.21 Factoring Leasing Co., Ltd 180 Dalian Bingshan Group Huayida Commercial 422,547.10 2023.12.08 2024.06.07 Factoring Factoring Co., Ltd Dalian Bingshan Group Huayida Commercial 237,454.60 2023.12.05 2024.06.04 Factoring Factoring Co., Ltd Dalian Bingshan Group Huayida Commercial 163,920.00 2023.12.15 2024.12.14 Factoring Factoring Co., Ltd (5) Asset transfer and debt restructuring among the related parties Item Transaction Current year Last year Purchase shareholdings of Sanyo Corporation 87,171,300.00 929,148,000.00 affiliated company Panasonic Corporation of Purchase shareholdings of 58,114,200.00 44,582,760.00 China Co., Ltd affiliated company Dalian Bingshan Group Co., Sold shareholdings of - 14,756,300.00 Ltd subsidiary Dalian Zhonghuida Sold shareholdings of Refrigeration Technology - 6,472,000.00 subsidiary Co., Ltd Panasonic Corporation of Sold shareholdings of - 70,990,000.00 China Co., Ltd affiliated company Sonyo Cold Chain (Dalian) Purchase shareholdings of - 37,152,300.00 Co., Ltd affiliated company Total — 145,285,500.00 1,103,101,360.00 The 13rd meeting of the 9th directors’ meeting approved the acquisition of 40% of the shareholdings of Sonyo Refrigeration (Dalian) Co. Ltd which is held by Panasonic Corporation of China Co., Ltd, and 60% shareholdings of Sonyo Refrigeration (Dalian) Co. Ltd which is held by Sanyo Electric (China) Co., Ltd. The share transfer price is based on the assessed value of net assets of Sonyo Refrigeration (Dalian)Co. Ltd on March 31, 2023, and the transfer price is 145.2855 million Yuan, of which 87.1713 million Yuan to Panasonic Corporation of China Co., Ltd and 58.1142 million Yuan to Sanyo Electric (China) Co., Ltd. After the transaction, Sonyo Refrigeration (Dalian) Co. Ltd becomes the subsidiary of the Company. 181 (6) Management Remuneration Item Current year Last year Total remuneration 5,033,700.00 4,895,800.00 (7) Other transactions with related party None iii. Balances with Related party 1.Accounts receivable due from related parties Closing Balance Item Related party Bad debt Book Balance Provision Accounts receivable Sonyo Cold Chain (Dalian)Co. 84,045,272.25 4,997,695.76 Ltd Accounts receivable BAC Dalian Co., Ltd 28,426,981.24 1,995,574.08 Accounts receivable Company under direct/indirect 12,595,875.91 174,589.96 Control of Panasonic Co., Ltd Accounts receivable Dalian Bingshan Wisdom Park 10,199,546.41 807,170.38 Co., Ltd Accounts receivable Dalian Fuji Bingshan Vending 6,270,661.55 440,200.44 Machine Co., Ltd Accounts receivable MHI Bingshan Refrigeration 3,390,197.07 237,991.83 (Dalian) Co., Ltd. Accounts receivable Alphavita Bio-scientific (Dalian) 2,791,425.71 200,691.99 Co., Ltd. Accounts receivable Dalian Bingshan Part Technology 1,606,085.44 52,796.80 Co., LTD Accounts receivable Dalian Spindle Environmental 1,072,064.56 75,258.93 Facilities Co., Ltd Accounts receivable Bingshan Technology Service 965,375.22 67,769.34 (Dalian) Co., Ltd. Accounts receivable Linde Hydrogen Fueltech 909,470.99 139,380.02 (Dalian) Co., Ltd Accounts receivable Dalian Bingshan Group Huahuida 138,450.00 9,719.19 Financial Leasing Co., Ltd Accounts receivable Dalian Fuji Bingshan Control 54,200.00 6,410.69 System Co., Ltd. Bingshan Technology Service Other receivable 100,000.00 100,000.00 (Dalian) Co., Ltd. Dalian Fuji Bingshan Vending Other receivable Machine Co., Ltd 48,000.00 7,608.00 Wuhan Sikafu Power Control Other receivable Equipment Co., Ltd. 4,287.61 156.93 Prepayment Jiangsu Jingxue Insulation Technology Co., Ltd. 4,088,975.80 - Prepayment Company under direct/indirect Control of Panasonic Co., Ltd 1,152,192.68 - 182 Closing Balance Item Related party Bad debt Book Balance Provision Sonyo Cold Chain (Dalian)Co. Prepayment 636,235.00 - Ltd Prepayment BAC Dalian Co., Ltd 216,191.11 - Dalian Fuji Bingshan Vending Prepayment Machine Co., Ltd 176,869.45 - Dalian Fuji Bingshan Vending Prepayment Machine Sales Co., Ltd. 77,000.00 - Bingshan Technology Service Prepayment (Dalian) Co., Ltd. 74,297.11 - Prepayment Dalian Bingshan Part Technology Co., LTD 13,806.00 - Contract asset Dalian Bingshan Wisdom Park Co., Ltd 550,000.00 38,610.00 (Continued) Opening Balance Item Related party Bad debt Book Balance Provision Accounts receivable Company under direct/indirect 145,605,125.57 11,219,927.46 Control of Panasonic Co., Ltd Accounts receivable BAC Dalian Co., Ltd 17,739,655.64 1,245,323.82 Accounts receivable Dalian Fuji Bingshan Vending 7,292,421.55 548,862.49 Machine Co., Ltd Accounts receivable Bingshan Technology Service 5,804,599.87 426,864.25 (Dalian) Co., Ltd. Accounts receivable MHI Bingshan Refrigeration 3,981,739.22 279,518.10 (Dalian) Co., Ltd. Accounts receivable Dalian Bingshan Part Technology 2,426,739.72 250,341.12 Co., LTD Accounts receivable Dalian Bingshan Group Huahuida 2,411,867.26 169,313.08 Financial Leasing Co., Ltd Accounts receivable Alphavita Bio-scientific (Dalian) 1,224,109.36 85,932.48 Co., Ltd. Accounts receivable Dalian Bingshan Wisdom Park 1,139,243.27 255,895.91 Co., Ltd Accounts receivable Linde Hydrogen Fueltech 841,284.21 59,058.15 (Dalian) Co., Ltd Accounts receivable Dalian Spindle Environmental 750,121.11 52,658.50 Facilities Co., Ltd Accounts receivable Dalian Fuji Bingshan Control 550,800.00 49,630.32 System Co., Ltd. Accounts receivable Dalian Shentong Electric Co., Ltd 94,897.33 6,661.79 Contract asset Company under direct/indirect Control of Panasonic Co., Ltd 1,982,037.10 612,603.41 Contract asset Dalian Bingshan Wisdom Park Co., Ltd 109,569.10 19,340.79 183 Opening Balance Item Related party Bad debt Book Balance Provision Prepayment Dalian Shentong Electric Co., Ltd 8,402,006.53 - Company under direct/indirect Prepayment Control of Panasonic Co., Ltd 3,825,488.41 Bingshan Technology Service Prepayment (Dalian) Co., Ltd. 825,789.25 - Prepayment Dalian Bingshan Group Huahuida Financial Leasing Co., Ltd 308,310.02 - Prepayment BAC Dalian Co., Ltd 58,513.00 - Prepayment Dalian Spindle Environmental Facilities Co., Ltd 36,455.00 - Dalian Fuji Bingshan Vending Other receivable Machine Co., Ltd 278,020.00 10,175.53 Bingshan Technology Service Other receivable 100,000.00 69,410.00 (Dalian) Co., Ltd. 2. Accounts Payable due from Related Party Closing Opening Item Related party Balance Balance Accounts Jiangsu Jingxue Insulation Payable Technology Co., Ltd 65,052,640.75 68,660,038.43 Accounts BAC Dalian Co., Ltd 21,731,458.82 20,678,948.10 Payable Accounts Sonyo Cold Chain (Dalian)Co., Ltd 10,067,451.24 - Payable Accounts Dalian Bingshan Metal Technology Payable Co., Ltd 9,745,165.83 14,347,841.71 Accounts Dalian Honjo Chemical Co., Ltd. 6,672,533.86 - Payable Accounts Dalian Bingshan Part Technology Payable Co., LTD 6,266,070.43 7,264,112.80 Accounts Jiangsu Jingxue Insulation Payable Environmental Engineering Co., Ltd 2,896,300.00 2,896,300.00 Accounts Company under direct/indirect Payable Control of Panasonic Co., Ltd 864,418.25 11,517,452.19 Accounts Dalian Spindle Environmental Payable Facilities Co., Ltd 794,006.00 1,247,400.00 Accounts Dalian Fuji Bingshan Control Payable System Co., Ltd. 502,571.47 1,942,256.73 Accounts Bingshan Technology Service Payable (Dalian) Co., Ltd. 126,241.74 282,405.30 Accounts Dalian Shentong Electric Co., Ltd - 1,396,176.88 Payable Dalian Bingshan Group Huayida Other payable 15,000,000.00 - Commercial Factoring Co., Ltd. Dalian Bingshan Group Huahuida Other payable 7,407,941.90 - Financial Leasing Co., Ltd. 184 Closing Opening Item Related party Balance Balance Company under direct/indirect Other payable 3,273,305.50 4,502,046.38 Control of Panasonic Co., Ltd Bingshan Technology Service Other payable 104,625.50 - (Dalian) Co., Ltd. Other payable Sonyo Cold Chain (Dalian)Co., Ltd 91,779.71 - Jiangsu Jingxue Insulation Other payable 70,000.00 666,864.48 Environmental Engineering Co., Ltd MHI Bingshan Refrigeration Other payable - 170,000.00 (Dalian) Co., Ltd. Dalian Jingxue Freezing Equipment Other payable - 70,000.00 Co., Ltd. Dalian Bingshan Group Huahuida Other payable - 1,172.61 Financial Leasing Co., Ltd. Bingshan Technology Service Contract liability 2,337,426.58 - (Dalian) Co., Ltd. Linde Hydrogen Fueltech (Dalian) Contract liability 2,138,974.27 2,274,454.09 Co., Ltd Company under direct/indirect Contract liability 313,952.83 1,299,686.95 Control of Panasonic Co., Ltd Contract liability Sonyo Cold Chain (Dalian)Co. Ltd 35,605.27 - Dalian Bingshan Group Huahuida Contract liability - 4,206,191.86 Financial Leasing Co., Ltd Dalian Spindle Environmental Contract liability - 736,424.50 Facilities Co., Ltd Other current Linde Hydrogen Fueltech (Dalian) liability Co., Ltd 319,616.84 - Other current Bingshan Technology Service liability (Dalian) Co., Ltd. 303,865.45 - Other current Company under direct/indirect liability Control of Panasonic Co., Ltd 35,021.95 130,044.39 Other current Sonyo Cold Chain (Dalian)Co., Ltd 4,628.68 - liability Other current Dalian Bingshan Group Huahuida liability Financial Leasing Co., Ltd - 546,804.94 Other current Dalian Spindle Environmental liability Facilities Co., Ltd - 81,006.69 Dalian Bingshan Group Huahuida Lease payable 656,980.83 983,501.51 Financial Leasing Co., Ltd Non-current Dalian Bingshan Group Huahuida liability due 25,140,961.04 34,388,781.83 Financial Leasing Co., Ltd within 1 year Long-term Dalian Bingshan Group Huahuida payable Financial Leasing Co., Ltd 10,331,937.30 31,009,644.16 Short-term Dalian Bingshan Group Huayida borrowing Commercial Factoring Co., Ltd. 2,976,345.47 - iv. Related Party Commitment None 185 v. Others None XIII. Share-Based Payment None XIV. Contingency & commitment 1. Commitment None 2. Contingency Up to December 31, 2023, guarantee obligations undertaken by the Company due to financial leasing. The Company sold refrigerating house equipment to Guizhou Pubu Cold Chain Food Investment Co., Ltd (“Pubu Cold Chain”) in the form of financial leasing. The Company as a seller singed finance lease contract with Dalian Bingshan Group Huahuida Financial Leasing Co., Ltd (hereinafter referred to as ‘Huahuida’) as both a buyer and a lessor and Pubu Cold Chain as a lessee. The contract price is 25.705million Yuan. In case the lease premium is delayed by the lessee, the Company needs to pay lease premium on behalf of the lessee and be obliged to the buy back responsibility. Pubu Cold Chain issued an unconditional, irrevocable and joint liability counter guarantee, and the Company is the beneficiary. Guarantee scope covers the full liability because of the sales in the form of finance lease. As at 31 December 2023, the balance of the guarantee obligation of the financial lease is RMB 6.5958million Yuan. The Company sold water chiller and heat pump to Shangdong Jiechuang Energy Technology Co., Ltd (“Shandong Jiechuang”) in the form of financial lease. The Company as a seller singed finance lease contract with Huahuida as both a buyer and a lessor and Shandong Jiechuang as a lessee. The contract price is 6.998million Yuan. Shandong Jiechuang had made 10% down payment, and remaining 6.2982million Yuan is underlined the leasing contract amount. In case the lease premium is delayed by the lessee, the Company needs to pay lease premium on behalf of the lessee and be obliged to the buy back responsibility. Shandong Jiechuang issued an unconditional, irrevocable and joint liability counter guarantee, and the Company is the beneficiary. Guarantee scope covers the full liability because of the sales in the form of financial lease. As at 31 December 2023, the balance of the guarantee obligation of the financial lease is RMB4.4262 million Yuan. 186 The Company sold refrigerating house equipment to Liuyang Zhongjie Technology Investment Co., Ltd (“Liuyang Zhongjie”) in the form of financial lease. The Company as a seller singed finance lease contract with Huahuida as both a buyer and a lessor and Liuyang Zhongjie as a lessee. The contract price is 9.831million Yuan. In case the lease premium is delayed by the lessee, the Company needs to pay lease premium on behalf of the lessee and be obliged to the buy back responsibility. Liuyang Zhongjie issued an unconditional, irrevocable and joint liability counter guarantee, and the Company is the beneficiary. Guarantee scope covers the full liability because of the sales in the form of financial lease. As at 31 December, 2023, the balance of the guarantee obligation of the financial lease is RMB 5.3227million Yuan. The Company sold refrigeration equipment, air conditioning and production line equipment to Shanxi Yiming Food Co., Ltd (‘Shanxi Yiming’) in the form of financial lease. The Company as a seller singed finance lease contract with Huahuida as both a buyer and a lessor and Shanxi Yiming as a lessee. The contract price is 28.2311million Yuan. In case the lease premium is delayed by the lessee, the Company needs to pay lease premium on behalf of the lessee and be obliged to the buy back responsibility. Shareholders Shanxi Yiming and nature person issued an unconditional, irrevocable and joint liability counter guarantee, and the Company is the beneficiary. Guarantee scope covers the full liability because of the sales in the form of financial lease. As at 31 December, 2023, the balance of the guarantee obligation of the financial lease is RMB 23.1802million Yuan. Dalian Bingshan-RYOSETSU Quick Freezing Equipment Co.,Ltd (‘Bingshan- RYOSETSU’), the subsidiary of the Company sold refrigeration equipment to Jilin Fuyu Agricultural Technology Co., Ltd (‘Jinlin Fuyu’) in the form of financial lease. Bingshan- RYOSETSU as a seller singed finance lease contract with Huahuida as both a buyer and a lessor and Jinlin Fuyu as a lessee. The contract price is 20.50million Yuan. In case the lease premium is delayed by the lessee, Bingshan- RYOSETSU needs to pay lease premium on behalf of the lessee and be obliged to the buy back responsibility. Shareholders Jinlin Fuyu and nature person issued an unconditional, irrevocable and joint liability counter guarantee, and Bingshan- RYOSETSU is the beneficiary. Guarantee scope covers the full liability because of the sales in the form of financial lease. As at 31 December, 2023, the balance of the guarantee obligation of the financial lease is RMB 18.8146million Yuan. Until 31 December, 2023, the balance of all guarantee obligation of the financial lease is RMB 58.3395 million Yuan. There is no situation where the Company needs to undertake the liability as the lessees’ default. There are no other significant or contingent matters to be disclosed until December, 2023 187 XV. Events after the Balance Sheet Date 1. Unadjusted significant events None 2. Information about profit distribution Item Content Planned profit/ dividend distribution 25,296,375.21 The 12nd meeting of the 9th generation of board approved the profit appropriation policy for the year Profit/dividend approved for of 2023, based on 843,212,507.00 numbers of share distribution declaration in total, paying out cash dividend of 0.3Yuan for every 10 shares (before tax) and cash dividend of B shares are paid in Hong Kong dollars. 3. Sales Return There is no significant sales return after the balance sheet date. 4. Others Except the subsequent event disclosed above, the Company has no other significant subsequent event. XVI. Other Significant Events 1. Error correction and effect in previous period No. 2. Debt Restructuring In 2023, Bingshan Group Engineering Co., Ltd, Tianjin Sunac Shengyuan Real Estate Co., LTD. (hereinafter referred to as "Tianjin Sunac") and Guangzhou Wanda Cultural Tourism City Investment Co., LTD. (hereinafter referred to as "Guangzhou Wanda Cultural Tourism") signed a commercial contract, and Guangzhou Wanda Cultural Tourism will repay the debt to Bingshan Group Engineering Co., Ltd with the right-of -use of 17 apartments and parking space that it subscribed for Tianjin SunAC. The price of the house and parking space is 21.707 million Yuan, the debt written off amount is 15.22 million yuan, and Bingshan Group Engineering Co., Ltd pays the difference of 6.5476 million Yuan in cash. Bingshan Group Engineering Co., Ltd paid a total of 6.54 million Yuan in two separate payments in 2023, and the above properties have completed the record registration of the contract in the Tianjin Municipal Commission of Housing and Construction in 2023. 188 3. Asset exchange (1) The exchange of non-monetary assets No. (2) The exchange of other assets No. 4. Annuity Plan No. 5. Operation termination No. 6. Segment Information The management of the group divided the business into 2 segments based on the geographic area: Northeast China and Central China. The Northeast is the Company’s general headquarters and the subsidiaries registered in Dalian. The Central includes Chengdu Bingshan Refrigeration Engineering Co., Ltd, Wuhan New World Refrigeration Industrial Co., Ltd and its subsidiary, Wuhan Lanning Energy Technology Co., Ltd. and Wuhan New World Air-conditioning Refrigeration Engineering Co., Ltd. (1) The basis and accounting policies of reporting segments The internal organization structure, management requirements and internal report scheme are the determination basis for the Company to set the operating segments. The segments are those satisfied the following requirements. 1). The segment can generate revenue and incur expenses. 2). The management personnel can regularly evaluate the operation results of segments and allocate resource, assess its performance. 3). The financial situation, operation results, cash flow and other accounting information of segments can be acquired. The group confirms the report segments based on the operating segments. The transfer price among segments is set base on the market price. The assets and related expenses in common use are allocated to different segments based on their proportion of revenue. (2) The financial information of reporting segments Amount unit :Ten thousand Yuan Northeast Central Items Offset Total China China 1 Operating income 530,652.74 32,697.34 -81,755.93 481,594.15 189 Northeast Central Items Offset Total China China 2 Cost 452,202.87 28,961.85 -80,604.97 400,559.75 Impairment loss on assets -1,598.13 -19.38 176.94 -1,440.57 Impairment loss on credit -5,471.28 -825.92 -676.01 -6,973.21 Depreciation and amortization 14,208.67 833.36 - 15,042.03 3 Investment income from associates and joint venture -430.08 45.75 -104.14 -488.47 4 Operating profits(loss) 23,385.81 -1,695.78 -15,169.41 6,520.62 5 Income tax 1,117.34 89.36 -103.53 1,103.17 6 Net profit(loss) 22,268.47 -1,785.14 -15,065.88 5,417.45 7 Total assets 1,068,080.89 47,663.74 -299,459.80 816,284.83 8 Total liabilities 548,471.77 36,864.46 -79,455.64 505,880.59 (3) Others None 7. Other important transactions and matters affect the investor's decision The group hasn’t had other important transactions and matters affect the investor's decision in this period. XVII. Notes to the Main Items of the Financial Statements of Parent Company 1. Accounts receivable (1) Bad debt provisions under accounting aging analysis method: Aging Closing Balance Opening Balance Within 1 year 457,075,717.70 536,467,765.87 1-2 years 124,339,052.45 71,727,073.34 2-3 years 58,073,083.27 56,755,645.42 Over 3 years 109,679,441.52 72,661,252.26 3-4 years 49,782,646.14 3,330,453.62 4-5 years 2,186,288.76 21,498,453.03 Over 5 years 57,710,506.62 47,832,345.61 Total 749,167,294.94 737,611,736.89 (2) Accounts receivable category Closing Balance Item Booking balance Provision Booking value Amount % Amount % 190 Closing Balance Item Booking balance Provision Booking value Amount % Amount % Bad debt provision on group 749,167,294.94 100.00 136,234,112.03 18.18 612,933,182.91 (1) Accounting age as characters 492,240,628.86 65.71 136,234,112.03 27.68 356,006,516.83 (2) Related party within consolidation 256,926,666.08 34.29 - - 256,926,666.08 scope Total 749,167,294.94 100.00 136,234,112.03 18.18 612,933,182.91 191 (Continued) Opening Balance Item Booking balance Provision Booking Amount % Amount % balance Bad debt provision 737,611,736.89 100.00 107,657,087.39 14.60 629,954,649.50 on group (1) Accounting age 388,615,076.25 52.69 107,657,087.39 27.70 280,957,988.86 as characters (2) Related party within 348,996,660.64 47.31 - - 348,996,660.64 consolidation scope Total 737,611,736.89 100.00 107,657,087.39 14.60 629,954,649.50 1) Bad debt provisions on group basis Closing Balance Aging Provision for bad Drawing Proportion Accounts receivable debts (%) Within 1 year 204,061,949.25 14,325,148.84 7.02 1-2 years 120,426,154.82 20,159,338.32 16.74 2-3 years 58,073,083.27 17,903,931.57 30.83 3-4 years 49,782,646.14 24,557,779.34 49.33 4-5 years 2,186,288.76 1,577,407.34 72.15 Over 5 years 57,710,506.62 57,710,506.62 100.00 Total 492,240,628.86 136,234,112.03 — (3) Bad debt provision Change during the year Closing Category Opening balance Accrued Collected/ Balance Written-off Other reversed Bad debt 107,657,087.39 27,893,374.74 - 758,749.50 1,442,399.40 136,234,112.03 provision Total 107,657,087.39 27,893,374.74 - 758,749.50 1,442,399.40 136,234,112.03 192 (4) Accounts receivable written off in current period. Item Written off amount Receivable actually written off 758,749.50 (5) Based on closing balance ranking, sum of the top five significant receivable and contract asset are 328,102,168.30 Yuan, representing 37.42% of total receivables and contract asset at the year end. 50,866,005.17Yuan bad debt provision is provided respectively. 2. Other Receivables Item Closing Balance Opening Balance Interest receivable - - Dividend receivable 110,000,000.00 - Other receivable 28,883,665.74 36,021,805.53 Total 138,883,665.74 36,021,805.53 2.1 Dividend receivable Item Closing Balance Opening Balance Sonyo Compressor (Dalian)Co., Ltd. 110,000,000.00 - Total 110,000,000.00 - 2.2 Other receivable (1) The category of other receivables Items Closing Balance Opening Balance Receivables and payables 20,260,866.63 22,444,622.16 Deposits 8,478,407.11 13,733,003.58 Petty cash 580,451.46 589,402.48 Total 29,319,725.20 36,767,028.22 193 (2) Other receivable listed by account aging Aging Closing Balance Opening Balance Within 1 year 3,049,940.86 10,080,508.11 1-2 years 3,316,384.23 4,307,883.00 2-3 years 1,315,000.00 20,750,000.00 Over 3 years 21,638,400.11 1,628,637.11 3-4 years 20,210,000.00 430,072.11 4-5 years 229,835.11 - Over 5 years 1,198,565.00 1,198,565.00 Total 29,319,725.20 36,767,028.22 (3) The bad debt provision of other receivable 1st stage 2nd stage 3rd stage Expected Expected credit Expected credit loss bad debt credit loss loss within the within the whole Total provision within 12 whole period (no period (impairment months impairment) incurred) Opening balance 596,484.59 - 148,738.10 745,222.69 Opening balance — — — — during the year --transfer to the - - - - 2nd stage --transfer to the - - - - 3rd stage --reverse to the - - - - 2nd stage ----reverse to the - - - - 1st stage Accrued - - - - Reverse 273,476.68 - - 273,476.68 Cancelation - - - - Written off 35,686.55 - - 35,686.55 Other movement - - - - Closing balance 287,321.36 - 148,738.10 436,059.46 (4) Bad debt provision details 194 Change during the year Opening Closing Category Collected/ balance Accrued Written-off Others Balance reversed Bad debt 745,222.69 - 273,476.68 35,686.55 - 436,059.46 provision Total 745,222.69 - 273,476.68 35,686.55 - 436,059.46 (5) Other receivables from the top 5 debtors % of Closing Closing Name Category Aging the total Balance of Balance OR Provision Top 1 Receivable 20,000,000.00 3-4 years 68.21 - Top 2 Other deposit 1,100,000.00 Over5 years, 3.75 40,260.00 Top 3 Bid deposit 1,000,000.00 1-2 years 3.41 36,600.00 Top 4 Bid deposit 800,000.00 Within 1 year 2.73 29,280.00 Top 5 Bid deposit 800,000.00 Over5 years, 2.73 29,280.00 Total — 23,700,000.00 — 80.83 135,420.00 195 3. Long-term equity investments (1) Category of long-term equity investments Closing Balance Opening Balance Item Closing Balance Provision Book Value Opening Balance Provision Book Value Investment of subsidiaries 2,416,830,861.29 - 2,416,830,861.29 2,163,545,361.29 - 2,163,545,361.29 Investment of affiliates 513,550,283.58 - 513,550,283.58 557,452,792.51 - 557,452,792.51 and JV Total 2,930,381,144.87 - 2,930,381,144.87 2,720,998,153.80 - 2,720,998,153.80 (2) Investments of subsidiaries Provision for Increase/Decrease Provision for Beginning impairment Investee Provision for Ending balance impairment balance at beginning Increased Decreased Others impairment at year end of year Dalian Bingshan Group Engineering Co., Ltd 193,749,675.77 - 100,000,000.00 - - - 293,749,675.77 - Dalian Bingshan Group Sales Co., Ltd 20,722,428.15 - - - - - 20,722,428.15 - Dalian Bingshan Air-Conditioning Equipment Co., Ltd 45,272,185.00 - 8,000,000.00 - - - 53,272,185.00 - Dalian Bingshan Guardian Automation Co., Ltd 50,638,361.52 - - - - - 50,638,361.52 - Dalian Bingshan-RYOSETSU Quick Freezing Equipment Co., 59,356,051.19 - - - - - 59,356,051.19 - Ltd 196 Provision for Increase/Decrease Provision for Beginning impairment Investee Provision for Ending balance impairment balance at beginning Increased Decreased Others impairment at year end of year Dalian Universe Thermal Technology Co., Ltd 48,287,589.78 - - - - - 48,287,589.78 - Wuhan New World Refrigeration Industrial Co., Ltd 184,674,910.81 - - - - - 184,674,910.81 - Dalian Bingshan Engineering & Trading Co., Ltd 71,537,064.86 - - - - - 71,537,064.86 - Sonyo Compressor (Dalian)Co., Ltd 1,380,455,603.23 - - - - - 1,380,455,603.23 - Sonyo Refrigeration System (Dalian) Co., Ltd 108,851,490.98 - - - - - 108,851,490.98 - Sonyo Refrigeration (Dalian) Co., Ltd - - 145,285,500.00 - - - 145,285,500.00 - Total 2,163,545,361.29 - 253,285,500.00 - - - 2,416,830,861.29 - (3) Joint ventures& affiliated companies Increase/Decrease Gains and Provision Provision for Adjustment Beginning losses Provision for Investee impairment of other Changes of Cash bonus or Ending balance balance Increased Decreased recognized for Others impairment at beginning comprehensi other equity profits announced under the impairment at year end of year ve income equity method 1. Affiliated company Dalian Honjo Chemical Co., Ltd 9,819,096.80 - - - -759,072.44 - - -900,000.00 - - 8,160,024.36 - Keinin-Grand Ocean Thermal Technology 60,089,313.51 - - - -509,338.51 - - -2,000,000.00 - - 57,579,975.00 - (Dalian) Co., Ltd 197 Increase/Decrease Gains and Provision Provision for Adjustment Beginning losses Provision for Investee impairment of other Changes of Cash bonus or Ending balance balance Increased Decreased recognized for Others impairment at beginning comprehensi other equity profits announced under the impairment at year end of year ve income equity method Dalian Fuji Bingshan Vending 111,101,339.93 - - - -43,490,921.84 - - - - - 67,610,418.09 - Machine Co., Ltd MHI Bingshan Refrigeration 15,401,109.10 - - - 1,142,546.44 - - - - - 16,543,655.54 - (Dalian) Co., Ltd. Dalian Fuji Bingshan Vending Machine Sales Co., - - - - - - - - - - - Ltd Jiangsu Jingxue Insulation Technology Co., 140,124,248.76 - - - 5,840,827.15 - - -1,610,172.00 - - 144,354,903.91 - Ltd Bingshan Metal Technical Service (Dalian) Co., 175,313,807.46 - - - 31,071,464.97 - - -33,134,422.30 - - 173,250,850.13 - Ltd. Dalian Bingshan Group Huahuida Financial Leasing 45,603,876.95 - - - 1,197,707.15 - - -751,127.55 - - 46,050,456.55 - Co., Ltd Total 557,452,792.51 - - - -5,506,787.08 - - -38,395,721.85 - - 513,550,283.58 - 198 4. Operating revenue and cost Current year Last year Item Revenue Cost Revenue Cost Revenue from main 1,075,630,556.46 894,335,541.56 976,567,011.13 853,599,677.62 operation Revenue from other 71,936,541.24 55,064,727.51 71,575,982.20 56,250,851.97 operation Total 1,147,567,097.70 949,400,269.07 1,048,142,993.33 909,850,529.59 5. Investment income Items Current year Last year Long-term equity investment gain under cost method 137,049,291.85 153,482,615.76 Long-term equity investment gain under equity method -5,506,787.08 -37,651,689.22 Gain from holding of other non-current financial assets 5,782,304.24 20,657,215.39 Discounting fees for bank acceptance note -159,560.15 - Gain from disposing long-term equity investment - 110,083,973.75 Gain from disposal of other non-current financial assets - 43,296,525.04 Gain on debt restructuring - - Total 137,165,248.86 289,868,640.72 6. Others None XVIII. Approval of Financial Statements The parent and consolidated financial statements of the Company were approved by the Board of Directors of The Company on April 24, 2024. 199 XIX. Supplementary Information to the Financial Statements 1. Non-operating profit or loss Items Current year Notes Gain or loss from disposal of non-current assets (including written -6,656,241.40 off part of the impairment provision) Government grants recorded into profit or loss 8,263,130.89 The gain or loss of fair value changes arising from the holding of financial assets and financial liabilities by non-financial enterprises 14,073,910.32 and the loss or profit arising from the disposal of them, apart from the effective hedging for the normal business operation. Expenses for using funds from non-financial institution recognized - in current profit/loss Profits/loss from investments or management of assets entrusted by - others Investment income on entrusted loan - Assets impairment provision accrued due to force majeure, e.g.: - suffering natural disasters Reversal of impairment provision of accounts receivable separately 3,784,207.57 tested for impairment Gains from acquisition of subsidiary or associates when initial cost is less than the fair value of identifiable net asset of invested - company Net gain/loss of subsidiary from combination under same control - between the beginning of year and consolidation date. Profits/loss from non-monetary assets exchange - Profit or loss from debts restructuring 1,791,602.29 One-off expenses incurred for discontinued operation activities such 3,928,060.93 as the expense of relocating employees Effects of gain/loss from one-off adjustments of gain/loss based on - laws and regulations of taxation and accounting. Share payment arising from the cancellation or modification of - share incentive plans For cash settled share payment, gains and losses arising from - changes in the fair value of employee payable after the exercise date The profits/gains from changes of fair value for investment property - subsequently measured at fair value model Gain/loss on excessive part from the transaction where the trading - price is obviously unfair. 200 Items Current year Notes Gains/ loss from contingencies beyond the normal business 10,206,786.86 Custodian fees obtained from entrusted operations - Non-operating revenue and expense besides the above items 2,831,968.96 Other profit or loss - Subtotal 38,223,426.42 Effect on income tax 5,162,725.13 Attributable to minority shareholders’ equity (after tax) 168,249.63 Total 32,892,451.66 2. Return on equity and earnings per share Earnings per share Weighted (EPS) Profit of report period average return Basic Diluted on net assets (%) EPS EPS Net profit attributable to shareholders of 1.63 0.06 0.06 parent company Net profit after deducting non-recurring gains and losses attributable to shareholders of 0.54 0.02 0.02 parent company Bingshan Refrigeration & Heat Transfer Technologies Co., Ltd April 24, 2024 201